The new engine of global economic growth may be demand from those who are “at the base of the economic pyramid”, say analysts at Bank of America Meryll Lynch. Their number is now 4.5 billion people, 3 billion of them by 2030 to join the middle class: it will be “the biggest growth story since the Second world war”.
“The “bottom billions” earn $1-10 a day, but their total purchasing power exceeds $5 trillion,” they write in the review, released on March 29. These are young people (60% under 30 years), most of which received at least secondary education, they use the Internet (2 billion people in developing countries), and their disposal is now more money than ever, explain analysts at BofA.
Trends that were mentioned in the review, creates the largest potential market in the trading history. “The bottom billions” spend $2.3 trillion on food, $508 billion for the purchase of real estate, $328 on clothing and personal care, $243 billion on health and $206 per education a year. Analysts suggest that it is possible to expect rapid growth in the field of information technology (the growth of GDP of emerging markets could lead to the creation of 140 million new jobs), banking (through the provision of services to the two billion people who have not previously used the banking services), consumer goods and health care.
The expansion of the middle class will be a challenge, says the review. Despite the potential for 14% of the population in 2015, still lived in extreme poverty, earning less than $1.25 a day, 795 million people starved, 780 million adults remained illiterate, 2.4 billion did not have access to sanitation. Therefore, the “bottom billions” is not only present great opportunities for economic growth, but also are one of the world’s major risk, given the problems with economic growth in developing countries, analysts warn. “Governments, businesses and other stakeholders will need to work together to reduce the level of disparity with the poorest 20% of the population receive only 6% of the income, whereas the richest 20 percent get half, and social instability, which is the highest since 1980 levels,” BofA analysts wrote.
If the “bottom billions” will still climb the economic ladder, the middle class spending will rise to $56 trillion by 2030, and to $84 trillion by 2050 (against $21 trillion in 2009). Investors who believe that this will happen, can invest in companies of companies focused on consumer demand, information technology, Finance and healthcare. It is also interesting investments in companies that produce the solutions associated with climate change, education, safety and waste management, says the review.