Roland Berger Trend Compendium 2050: Economics & Business

Roland Berger Trend Compendium 2050: Economics & Business

January 19, 2022

Trend 4 of our Trend Compendium 2050 revisits globalization, analyzes global power shifts, sectoral transformation, and the debt challenge

In Trend 4 of our Trend Compendium 2050 we deal with essential trends in economics and business. Here, we look at the slowing pace of globalization and emerging power shifts, as well as future challenges affecting sectoral transformation, and issues arising from the global debt challenge.

Unloading of containers in the port

Revisiting globalization: A new, slower phase of globalization lies ahead

In an age of slower globalization, international trade and trade relationships are in a state of transition and adaptation. Regarding the longer-term development of global exports, the global pandemic and the 2008 financial crisis have clearly left their mark: Welcome to slowbalization.

In addition, the resurgence of protectionism and trade interventions affects international trade relationships and weakens supply chains, particularly in advanced economies. A trend towards more regional value chains is being observed.

In terms of foreign direct investment inflows, India is expected to show the strongest growth over the next decade, followed by other Asian countries. A new important free trade agreement, the Regional Comprehensive Economic Partnership (RCEP) is coming into force, covering most economies of the Asian-Pacific region.

Power shifts: Economic power is shifting further toward emerging countries. By 2050, Asia is expected to generate half of global GDP.

Traditional economic power houses will lose importance, where GDP growth is set to decline while emerging countries will benefit from labor dynamics and advantageous population trends.

A new global middle class is rising – originating predominantly from Asia, totaling almost 1 billion people by 2030.

China has furthermore announced a new growth strategy: Instead of focusing on exporting low-cost intermediate goods to industrialized nations, the new strategy focuses on strengthening China's domestic market and exporting high-quality end products to global markets. This change in strategy carries implications for the rest of the world – not just along China's Belt and Road Initiative.

Sectoral transformation: Digitalization, sustainability and socio-demographic factors drive industries to transform

The future holds major sectoral transformations due to the interplay of three significant drivers: Digitalization , socio-demographic factors and aspects of sustainability. The latter has a very broad reach: From increasing consumer willingness to pay more for green credentials, over rising carbon prices to required ESG commitments in areas of corporate financing. Across a deep-dive in four sectors – automotive, utilities, aviation and financial services – we analyze future transformative changes.

In the future and across all sectors, the increasing use of AI and other powerful new technologies, such as blockchain, will enter the mainstream. To name just a few examples, technological advances and innovations will impact how energy is generated and distributed, how urban mobility will become airborne, and how new business models arising from FinTechs and crypto-currencies herald a paradigm shift in the financial sector that even comparatively less agile players, such as central banks, are having to face.

Debt challenge: The increase of public and private debt levels raises a lot of questions for the future

Debt is a global issue – and not just since the coronavirus pandemic has public debt in many countries displayed an upward trend. Typical country examples have been cited widely for many years, such as Japan and Greece. But they are by no means the only ones with high levels of government borrowing or debt in other sectors of the economy.

Post-pandemic it is unclear how to deleverage. If debt is put to productive use, such as investment in infrastructure (as opposed to a more consumptive use) and growth generated thereof exceeds real interest rates, debt can be "good". However, an analysis of long ranging timelines of marginal debt productivity is showing a downward trend.

Rising debt, particularly at the state level, often leads to concerns regarding intergenerational equity and future generational debt burdens. But this is a case of 'be careful what you wish for' – debt level reductions go hand in hand with often wide-ranging cutbacks. It is therefore important to balance debt reduction.

How companies can take advantage of megatrends

Business is entering a new era – globalization is slowing, and companies must thus reassess their target markets under new and differentiated viewpoints. Adapting product and service offering to newly emerging markets is key. Since protectionism can make it difficult to deploy employees across borders, companies should increasingly focus on using and promoting local talent. This builds trust in the country and supports decentralized decision-making by companies.

The vulnerability of international supply chains as seen during the latest global crisis has highlighted that companies must factor in more flexibility and resilience in their operations strategy by reducing levels of dependencies regarding raw materials as well as trading partners. This will ensure greater levels of security in times of crises.

Sustainability is and will remain an ongoing topic affecting all sectors in a myriad of ways. In particular, it must be investigated where CO2 can be saved in the value chain, because the price of CO2 emissions will continue to rise. Companies must habitually screen and prepare for regulatory changes – but it can pay to see regulation as an opportunity to explore financial incentives offered to support a sustainable transformation.

With greener credentials in mind, it also pays for companies to meet ESG criteria, as investors and lenders are increasingly targeting green(er) projects. Given this background, companies should review current and planned (re-)financing of assets for environmental aspects, inter alia, and adjust accordingly if necessary.

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Roland Berger Trend Compendium 2050: Economics & Business

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In Trend 4 of our Trend Compendium 2050 we deal with essential trends in economics and business

Published January 2022. Available in
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