Global economy adjusts to ‘slow-fast world’

Age has an impact on the economy and growth in consumer spending because people’s economic needs and contributions vary over their life cycle. Economies with a larger share of youth or elder populations face slower growth than those with a larger share of working-age populations^1.

 Finding alternative opportunities for growth in this new economic reality will be essential in the years ahead. Financial inclusion is one area of promise, especially in developing nations where large segments of the population live without access to banking, credit and other financial services. This can have serious adverse implications for economic growth. Countries with younger populations could see a demographic boost to growth, especially as financial inclusion efforts broaden access to financial services. Cash and check conversion to credit represents a nearly $9 trillion opportunity in the global economy. Card penetration varies widely from countries that have already reached saturation, to others where the card market is just starting to take off.

Global consumer spending patterns are also changing. Mass urbanization has caused a rise in mega cities (more than half are located in Asia), which now account for large concentrations of spending and spending power. Today, about one in every eight dollars of consumer spending globally is spent in a mega city. This has implications for the rest of the world, because these cities are becoming more tightly integrated than ever before through air travel. As new routes are laid and new capacity added, this lift in air connections will eventually support the significant growth in cross-border travel that is expected.

Rapid digital disruptions are changing the economic landscape

Although the global economy remains stuck in low gear, the world is changing faster than ever. The digital revolution is causing major disruptions across many industries, including home entertainment. Analog technology, such as the video cassette recorder and DVD, defined home entertainment for more than 30 years, but it took less than a decade for home internet access to displace it. Spending on movie downloads and streaming subscriptions in the U.S. have now topped purchases and rentals of DVDs for the first time last year—and are expected to nearly double by 2019 as physical home video revenues continue their downward trajectory. So far the digital disruption has remained largely confined to the virtual world, but for how long?

Could a similar disruption occur in the oil industry—one of the most important commodities to the global economy?

With more people concentrated in dense metro areas, a growing share of the population is opting out of owning a car. The use of lighter composite materials in car manufacturing combined with the advancement of electric vehicle technology could boost fuel efficiency further over the coming decades. Collectively, digital disruption, technological advancement and slowing growth could cut global oil demand by about a third, with oil prices remaining lower for longer (Brent crude could average around $50 per barrel in 2017²).

New “slow-fast” economy creates growth uncertainty

The spread and uptake of technology will continue to transform traditional industrial paradigms. More disruptions will cause new upheaval and churn in the economy—old technologies will be discarded as new technologies emerge. The inherent tension between digital disruptions and the slower dynamics that drag on economic growth (population trends, urbanization) has created a new economic reality that we call the “slow-fast economy.”

It’s still unclear how conflicting dynamics in this new global economy will be resolved. Sluggish economic growth is expected to continue throughout the coming year. However, if new (yet unforeseen) growth can emerge from this slow-fast tension, there may yet be hope for a more robust future global economy.