Landscape of Future Economy

In the following article, I want to share with you my thoughts on the future economic landscape. This article was inspired by various research and articles on the matter. For example, the writing by Lan Ha that was published on Euromonitor International. This text will include the most evident economic trends that are very likely to shape what the global economic map will be in somewhat foreseeable future.

One of the largest trends in economies all over the globe for the foreseeable future is that the difference in economic development across countries is very likely to become even more pronounced than in the pre-pandemic era. The trend of slow yet somewhat gradual elimination of economic unevenness of countries that prevailed before the virus-brought changes are fading away since there is a big difference in policies designed to contain the virus and back national economies introduced in various countries. Even in the Western world – where countries seemed to adopt sufficiently similar economic responses to the economic disaster dictated by the virus due to somewhat indisputable conceptual agreements on economic policies – differences are seen. For example, the rate of recovery of the US economy is higher than that of the EU’s national economies. Namely, the US is expected to finally reach the pre-pandemic levels by the end of 2021, while the same milestone is set for the EU to the end of 2022. The main drivers behind uneven recovery rates across national economies are represented by a varying approach to fiscal policy (e.g., stimulus checks), vaccination policy, level of democracy, and mentality of inhabitants.

Notably increasing national debts. Many countries adopted generous and well-designed fiscal policies during the crisis which supported economies and, to a point, prevented people from becoming financially unable during lockdowns. However, all of these fiscal gestures and initiatives cannot leave national budgets without challenge-posing debt scars. Nations amassed public debt during the pandemic faster than during the Great Financial Crysis of 2008-9. Large public debts may significantly challenge the development of countries with emerging markets.

Globalization is under threat. The effects of the virus led to global value chains functioning less efficiently. The world saw a decrease of 7.2% in USD in global exports. It is important to note that the virus itself is not the root cause for a dropback in globalization. The process of slowing down the global value chains and trade is may be largely attributed to clashes in geopolitics, trade wars, etc. For example, as the concern over the war between China and Taiwan rises, the US decided to invest in enlarging its own semi-conductor producing facilities which it currently gets from the world’s leading semi-conductor producer Taiwan, among other suppliers.

A transition from low value-added value activities to high value-added activities. Historically and most prominently during the 20th century, the delivery of high value-added activities to the table of world economies was performed by rich and developed countries with market economies. Less developed countries were more well-represented in less value-added sectors such as primary industries such as agriculture, unsophisticated manufacturing, forestry, etc. Now, when we see a rapid development of e-commerce and technology in general, we may notice that developing and emerging economies are increasingly represented in retail, finance, etc. This enables growth in income in such countries. Rising incomes in developing countries, in turn, boost the global economy via an increase in the global demand for products and services.

Not surprisingly, the rate of economic growth of developed countries is nothing close to the pace of growth of developing countries. Already in a quite foreseeable future, we will see even greater attention to Asia-Pacific due to its huge markets and potential economic capabilities. As we see there an economic boom, residents of those countries get richer which is a great market opportunity. This inevitably leads to a much greater economic and possibly political influence and power of the Asia-Pacific. More bold voices are saying that the world economy not only will lose the status of Western-centred but will even go to another extremum – it will be Asia-centered. For many generations, this pivot was impossible to imagine even in the most absurd scenarios. Here we speak not only about such economic giants as China and Japan, but we also should take into consideration India, Indonesia, Vietnam, and Thailand which demonstrated astronomic developments when compared to where they were located a couple of decades ago.

From 2021, it is reasonable to assume an implicit agreement on pursuing a greener approach to the economy among the economically leading nations. The priority of low-carbon economies is likely not only to stick around but to gain more attention from now on since climate change gets increasingly difficult and senseless to deny. Arguably, the current economic leader of the world – the US – re-joined the Paris Agreement which it had left previously. European Union authorities and the Chinese communist party leaders also undertake steps toward greener and more digital economic settings. However, in a somewhat longer term, measures designed to contain human contribution to climate change should be dramatic due to both rapid expected growth of population and urbanization of inhabited areas. Increasingly large masses of people move to urban areas searching for better economic opportunities. This is going to lead to very densely populated areas. This, in turn, exacerbates issues of pollution and essential infrastructure which already are challenging. In some unserved areas and regions, this development may lead to even worse living conditions and even bigger humanitarian crises which will lead to increased crime rates, international terrorism, etc. Africa can be named as a prime example for such a region, unfortunately. The region is projected to demonstrate the highest birth rates in the future as Asia reaches its demographic plateau.

As you see, the world is full of challenges and changes that are likely to happen in the future. However, we should think about our place in the future and the living conditions that the future holds for us now to ensure that we protect our values and achievements. As Nassim Taleb said, “Love without sacrifice is like theft”.