BRIC nations’ falling worker-base to drop a bombshell
The BRIC countries accounted for a third of world growth in the past five years, thanks partly to a huge supply of cheap labour. Yet the growth in China’s working population is set to slow sharply and Russia’s will actually fall. So where will future global growth come from?
The growth in Brazil, Russian, India and China has been good for those countries but it has been good for the developed economies too. And as they now account for a fifth of global GDP and half the world’s steel consumption, they are important for the whole international economy.
Yet these engines of growth are set to change gear. Not only is labour cheap, rising domestic savings rates in the BRIC countries has financed their expansion. However there will be a sharp decline in investment growth over the next decade, points out Brian Coulter, the emerging markets strategist at investment group Legal & General.
Populations in China and India, in particular, have forgone rising income in the past to finance investment. But with the balance between the number of workers and the dependents they support falling fast, that ability to save will decline. Instead of being the world’s producers, the BRICs will become the world’s consumers. That means fewer goods to export to the west and an end to low prices.
China’s ‘one child’ policy has finally worked its way through the demograhics to leave the working population rising very slowly. Russia’s working population is actually forecast to fall. That means fewer hands feeding more mouths. It is the end of a phase for the emerging markets but the end of an era for the developed countries that have based their own modest growth on those economies.
