The Organisation for Economic Cooperation and Development reports a gradually moderating yet robust medium-term outlook for Asia from 2014 to 2018 of 6.9% a year, mostly due to moderate growth in China and India. While exports will play a diminishing role in driving growth, the rise of Asia’s middle class across the region means private consumption will play a bigger role in driving growth.
As Kishore Mahbubani, the dean of the Lee Kuan Yew School of Public Policy in Singapore, notes, the explosion of Asia's middle class is stunning. Although its size today stands at 500 million people, this population could grow to 1.75 billion people by 2020.
Even more striking is the prediction by Homi Kharas, a senior fellow at the Washington, DC-based Brookings Institution, who says that while the European and American middle classes will shrink from 50% of the global total to just 22% by 2030, Asia will be home to 64% of the global middle class, and it will account for more than 40% of global consumption. This population boom, coupled with increasing intra-regional trade and freer movement of goods and human capital, will yield tremendous strategic and marketing opportunities, as well as challenges for investors and marketers, who will have to invest their money and effort into understanding their target customers in a region that is diverse.
Urban areas will also be transformed as the wealth spreads further from tier-one cities to lower tiers, as well as inwards away from traditional coastal metropolises. Providers of infrastructure, transportation and property have begun working more closely with financial institutions to fund the supportive infrastructure that will service the needs of this growing middle class. Asian policymakers and government leaders will have to address pertinent concerns which question whether the region can forge ahead, regardless of fluctuations in global demand.
Indeed, positive long-term predictions and projected trends will also have to include short-term political disruptions such as those unfolding in Thailand. Yet the upshot is the growing rise of new Asian money from consumers and companies whose products and services can successfully meet the needs of Asia’s middle class. Nonetheless, between now and 2030, the world’s attention will still remain on Asia.
Lawrence Yeo is CEO and principal consultant of AsiaBIZ Strategy, a Singapore-based management consulting firm providing Asia market research, business strategy development and export/FDI promotion services. Website: www.asiabizstrategy.com