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News from Members The global middle class will increase by 3 billions in the next two decades – two-thirds will be in Asia-Pacific

The global middle class will increase by 3 billions in the next two decades – two-thirds will be in Asia-Pacific

by EY May 14, 2013

Website www.ey.com

By 2030, two-thirds of the global middle class will be residents of the Asia-Pacific region, while Europe’s share of this population will have dropped by 14% according to Ernst & Young’s Hitting the sweet spot report.

In Asia alone, 525 million people can already count themselves as middle class – more than the total population of the European Union. Over the next two decades, it is estimated that the middle class will expand by another three billion, coming almost exclusively from the emerging world. A significant proportion of the new Asian middle classes are also expected to be at the upper end of the income bracket and boast impressive spending power.

Alexis Karklins Marchay, co-Leader of Ernst & Young’s Emerging Markets Center, “By 2030, as more and more people enter the middle class it is hoped that this growing cohort of consumers with new money and new demands can help to keep the floundering global economy afloat.”

Chinese middle class expected to reach one billion by 2030
China and India will become the powerhouses of middle class consumerism over the next two decades although other rapid-growth markets such as Mexico and Brazil will also contribute. Nevertheless, the Chinese and Indian contributions will be substantial. Today, China has around 150 million people who are considered to be part of the global middle class within the next decade this expected to have reached 500 million. By 2030 around one billion people in China could be middle class – as much as 70% of its projected population.

India’s global middle class, meanwhile, is much smaller at around 50 million people, or 5% of the population. It is estimated that this group will grow steadily over the next decade, reaching 200 million by 2020. After this, India’s middle class growth is really expected to accelerate, reaching 475 million people by 2030 and adding more than the Chinese to the global middle class worldwide after 2027.

A changing world
By 2030, there will be a much broader distribution of incomes around the world. While millions have been brought out of poverty over the last few decades it is only recently that we have begun to see the impact of the rising middle classes across the emerging markets. However, the report suggests that despite the growth of spending in emerging markets far outstripping developed market spending in recent years, there is still some way to go before contributions reach parity. Although emerging markets consumption is not sufficient to cause a return to pre-2008 global growth rates, it may be enough to prevent a return to global recession in the next few years (providing that consumption in developed markets does not decline).

Alexis Karklins Marchay comments, “The emergence of a new middle class, with spending power to match developed nations, will offer tremendous opportunities to businesses. These opportunities can arise very quickly, and multinationals need to be ready to respond. Also, these business opportunities will not be confined to consumer goods: the emergence of a wealthy middle class will also open up the markets for financial services or the health sector, for instance, in new territories.”
What could be the implications for Romania?
This global demographic transformation represents a major opportunity for exporting companies in Romania. The middle class from around the world, but especially the one that is currently shaping up in emerging markets, consumes goods that can be competitively produced and delivered by Romanian companies. It is important for local exporters to analyze the demographic trends outlining for the next decades and already join the race to recalibrate their offer for new customers.
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About Ernst & Young
Ernst & Young is one of the world's leading professional services firms with approximately 167,000 employees in 700 offices across 140 countries, and revenues of approximately $24.4 billion in 2012. Our network is the most integrated at global level and its vast resources allow us to help our clients benefit from every opportunity. In Romania, Ernst & Young has been a leader on the professional services market since its set up in 1992. Our over 500 employees in Romania and Moldova provide seamless assurance, tax, transactions, and advisory services to clients ranging from multinationals to local companies. Our offices are based in Bucharest, Cluj-Napoca, Timisoara, Iasi and Chisinau. For more information, please visit www.ey.com

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