by DBS Asian Insights
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David Carbon discusses global growth
“What we care about is growth per person – my income, your wage – not GDP in the aggregate. A small family can be just as rich, or richer, than a large one.”
Global growth is slowing and markets are in a tizzy. Governments and central banks are slashing interest rates into negative territory and printing money in an attempt to get things back to normal.
But what if this is as good as it gets? Actually global growth is pretty much where we’d expect it to be. Slow is the new fast. If you are waiting for faster growth, don’t. This is as fast as it gets.
Why? Two reasons. Productivity and population growth are slowing. As countries get richer, productivity gains naturally get smaller. And as birth rates fall, the working age population starts shrinking. Decreasing working age populations and productivity gains mean that headline GDP growth will be slower in future.
But is slower growth a bad thing? Not necessarily. What really matters is growth per person, and in Asia it’s still going strong. Asia is growing four times faster than the G3, and 25 years from now will still be growing twice as fast.
We often say that Asia’s growth amounts to creating an entire Germany, right here in Asia, every 3.5 years. What is eye opening is the fact that, even with considerably slower growth, the time it takes for Asia to put a Germany on the map will grow shorter and shorter. In 10 years, Asia will only take 2.2 years to create a Germany.
So is growth slowing down? Or is it in some sense speeding up?
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Population growth is falling and populations are getting older
When a country is developing, productivuty growth is EASY
when a country is developed, productivity growth is HARD
In 2014, Asia created the economic equivalent of a Germany every
The time it takes to do so continues to shrink every year
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