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Gamechangers

  • Article

How nine key themes are shaping the future of the global economy

  • Seismic shifts in technology, population and energy are transforming the way the economy works...
  • ...with implications for growth, inflation and jobs...
  • ...adding to challenges facing policymakers across the world

How nine key themes are shaping the future of the global economy

At HSBC Global Research we pay particular attention to nine key themes - nine generational trends, each of which we think will have a role to play in shaping the future of the global economy. They will impact global growth potential, inflation, labour markets and trade patterns as well as the development of businesses and policies from governments.

Indeed, they have already begun transforming the way the economy works, and as they interact with and feed off each other, we expect the pace of change to accelerate. But as human beings, we regularly miss the wood for the trees. Too much attention is paid to the specific events that happen today – an earnings release here, a GDP print there – and too little to the forces that are reshaping the world, little by little every day.

As human beings, we regularly miss the wood for the trees.

To give an example: the internet and smartphones have transformed the global economy. But it’s not as if we woke up one day and suddenly we all used social media, streamed music and watched people play video games online. Nor did China become such an important driver of the global economy overnight. These changes happened slowly and gradually, driven by an underlying trend. That's why taking a step back and looking at the bigger picture can be helpful.

So what exactly are the nine themes we track?

Our themes

Let’s start with demographics – one of the most important underpinnings of the global economy. We know, pretty much, how these will evolve in the course of this decade – working-age populations will start shrinking in more markets and the number of retirees will surge. We expect a future consumer class to come through, whose tastes may well be different from the generation before them. This will be two-fold: more consumption coming from emerging markets as well as taste changes being pulled along more aggressively by a cohort of consumers in their late 20s and early 30s in key markets, such as more conscious and digital consumption.

But it’s not just about how many people we have – where they live will be key, too. We expect future cities to evolve in ways that make urban areas more productive. In the west, this will mean competing for people by investing in public transport, housing and green spaces. In the emerging world this will mean investment in many of the same things to make fast-growing cities work much better for their larger populations.

This includes much of what is going to happen with future transport. Public transport investment and electric vehicles will likely be central to this theme. Technological breakthroughs, including automation, could lift productivity and disruptive technology could create whole new industries, while other developments in digital finance will likely mean more digital payments, lower payment costs and the likely spread of Central Bank Digital Currencies (CBDCs).

>1bn
Over the next two decades, the number of middle-income consumers worldwide will grow by more than a billion
X3
The share of US retail sales made online tripled between 2012 and 2022
>600TWh
Mainland China has more than 600TWh of installed wind and solar capacity

And central to this is likely to be changes in terms of the energy transition. The journey has started towards a greener planet when it comes to energy and economies become more energy efficient and shifting their energy usage is only likely to accelerate in the coming years. Many of the other themes will be key in achieving clean, sustainable, growth.

And finally, we think real interest rates are likely to be lower for longer because of factors including debt overhangs, demographics, globalisation and technology.

These thematic topics are key for understanding the changing nature of the global economy. They will likely influence the scale and pattern of global growth in the years to come – and of course the disruptions they cause to industries and business models will generate challenges and opportunities for investors and policymakers alike.

Look out for more from HSBC Global Research on these trends as they evolve and continue to shape our world.

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