The New Geography of the Planet in 2050

Is 2050 just around the corner or not? It’s 27 years away, which is half of an adult’s lifetime. Is 27 years a long period? Perhaps not, considering the unstoppable progress of human history. Maybe yes, if you think about the whirlwind pace at which our own history moves. From this perspective, it seems like a long enough time to allow humanity to make decisive changes or veer off course in terms of its own destiny.

But what will the world be like in 2050? At first glance, not too different from how it is now, but deeply transformed by some key trends. Without claiming to predict the future, we will try to provide an answer by focusing on certain key aspects that will undoubtedly have a profound transformative effect: demography, economic development and some macro trends that, as we will see, represent both challenges and opportunities.

A more crowded world and an ageing West

Let’s start with some numbers. According to the United Nations, in 2050, there will be 9.7 billion people, a significant increase (almost 25%) compared to the current 8 billion, but not far from the projected 10.4 billion for 2100. After a phase of rapid expansion, we will witness a progressive reduction in fertility rates, against a backdrop of resource scarcity, which may begin to manifest more clearly in the daily lives of the majority of the population.

It is predicted that over half of the population growth will occur in Africa, a continent destined to expand its relevance on the global economic chessboard and in the perception that the rest of the planet has of it (also through migration). The African population will nearly double, reaching 2.5 billion from the current 1.4 billion.

On the contrary, the population in Europe and China will decline in populations, while the United States will reach its peak. In all these areas, population ageing will become an increasingly palpable reality. Just to give an example, Italy, one of the countries where the population has already started to decrease, will be inhabited by 54 million people, 10% fewer than the current population. This means that if there are currently 68 retirees for every 105 workers, by 2050, unless the retirement age is drastically pushed forward, there will be 105 retirees for every 100 workers. The impact of this change on the welfare system and fiscal policies of Western countries will be a central issue in politics over the next 30 years, but while we search for a solution, those who have not yet considered integrating their pension with investments should do so as soon as possible.

Asia will still be home to over half of the world’s population, although its relative share of the total population will decrease (from 59% to 54%).

Younger generations will tend to live in cities much more than they do now. The urban population will represent 68% of the total, compared to the current 54%. This means that within the next 27 years, cities will host an additional 1.2 billion people. This enormous figure will change the face of metropolises, creating unprecedentedly large urban agglomerations, economic spaces that will define the concept of community and become fertile ground for economic and social innovation.

A world that continues to grow economically

Regarding economic growth, it is expected to continue to be positive. This is good news: the idea that the world will continue to grow is exactly why we think it is a good idea to continue investing. It is also reassuring to think that, on average, the planet will become a more comfortable place for more people (excluding the growth of social inequality).

But who will benefit from this growth? Forecasts over such a long time frame are never certain. According to the OECD, the GDP of the member economies will grow from 62 trillion to 92 trillion dollars. PwC predicts global GDP growth of 3.5% per year.

If these estimates were to materialise, they would be quite positive. Looking at real GDP growth over the past 50 years, we find a similar rate of 3.4%. The growth rate drops to 2.7% if we look at the past 20 years and 2.4% if we look at the past 10 years. Most long-term forecasts, therefore, incorporate a reversal of the current slowing trend. This can be explained by the fact that growth will find new frontiers both technologically and geographically. Emerging countries will take the lead, with the vast majority of growth in the next 27 years occurring in countries that have yet to fully develop their economic potential.

BRICs and MINT: The New Frontiers of Development?

The acronyms BRICs (Brazil, Russia, India, China, and South Africa) and MINT (Mexico, Indonesia, Nigeria, Turkey) were coined to classify resource-rich countries with dynamic populations that have the potential to join the group of major economic powers.

There is no doubt that these countries will play a more central role, in some cases decisive, in the global economy over the next 30 years. It is projected that by 2037, the economy of the BRICs will surpass that of the G7, and in terms of purchasing power parity, this overtaking has already occurred.

However, the past 20 years have taught us to approach long-term growth predictions with caution. While at the beginning of the new millennium, the BRICs countries experienced growth levels above expectation (which played a significant role in the popularity of this acronym), the trend has significantly reversed in the last 10 years, with Russia and Brazil even experiencing a decrease in their relative power in the global economy.

If we look at the BRICs group, only China has managed to establish itself as an economic powerhouse, while India, which seems to have recently embarked on a clear path of growth, still lags behind where most analysts would have placed it 20 years ago. The group of MINT countries, the new generation of BRICs, still faces complex institutional and political challenges that may significantly affect their economic development.

Looking to the future, the lesson from BRICs is that potential for growth does not always translate into rapid and robust development. On the contrary, such dynamics appear to be the exception rather than the rule, especially as countries approach more advanced stages of development where the complexity of the obstacles to overcome increases. Inequalities, positioning in the international arena, corruption, citizens’ rights and freedoms, CO2 emissions, and sustainable growth become crucial issues to address in order to enable these countries to fulfil their promise.

Another lesson for investors is that strong economic development does not necessarily correspond to an equally promising investment opportunity. If we look at the performance of the Chinese stock market over the past 10 years, we see that it has remained almost flat. In the same period, the main American index has increased its value by one and a half times, with a performance of 157% as of the end of March. Economic growth alone is not sufficient for success in the market, as it is necessary to develop institutions and convince international investors.

This will become a theme over the next 30 years when the process of deglobalisation and the fragmentation of the international scene may become even more pronounced. This remains one of the major question marks: whether the development of these countries will occur harmoniously or if we will see an increasingly polarised world where the circulation of goods, people, and capital will be limited to specific geographic areas. For now, it seems that the latter path has been taken, but we will have to see how deep the division will be considering we are starting from a situation of great integration.

Macro trends: Risk or opportunity?

In short, if development visits new locations, it will not be the only force that changes the structure of the global economy, especially in Western countries that, as we have emphasised, will not benefit from demographic momentum. If we had to select from the many trends whose roots we see, there are two in particular that have high potential to become the soundtrack of the next 30 years: the fight against climate change and the new industrial revolution marked by automation, which will benefit from advancements in robotics and artificial intelligence.

Without going into specifics, it is interesting to note that both of these trends have a dual nature. On one hand, there are risks: climate change poses crucial challenges to humanity, and progress in new technologies risks disrupting labour market equilibrium. This aspect is somewhat counter to recent history. The prospects for humanity are not only progressive but also bittersweet, and this influences how we look at the future and may undermine, in the view of many, the determination to speculate on it.

On the other hand, there are opportunities: these two trends will be able to mobilise an unprecedented amount of public and private investment. We can already see this, but we believe that the energies and efforts mobilised by these sectors will continue to increase. Industrial and economic revolutions have often been a great profit opportunity for investors (as those who have invested in the past 15 years in a market dominated by Big Tech know well). Investing means financing change and positioning oneself on the right side of the curve. We cannot be certain that the next 30 years will bring investors the same satisfaction as the past 30. However, for now, we do not see a reason to anticipate a significant decline in financial returns. In a rapidly changing world, we believe that investing for the long term remains the best strategy to protect oneself and navigate change rather than being subjected to it.