Global predictions indicate the dawn of a new era for growth markets from 2017 onwards. As developed economies are experiencing uncertainty due to political events, developing ones are likely to resume their good performance. Countries such as Russia, China, Brazil or Nigeria start looking safer in the investors’ eyes. So, the next question we face is where will we make profitable investments? We’re analysing major growth opportunities across six sectors in developing growth markets.
Growth markets’ era is not over
We should consider growth markets as ‘mature’ rather than ‘volatile’ in nature, with different markets following distinctive growth paths towards stability and long-term prosperity.
Despite recent stagnation in the pace of real GDP growth as a result of domestic and external factors, growth markets will continue to see a rising share in global GDP growth in the next five years, reaching almost 65% by 2021.
Opportunities defining growth markets
To capitalise on the wide array of growth opportunities still out there, we need to understand the shifts governing the market and operational landscape – in particular across six sectors, which are essential to achieving balanced economic and human development in the near future:
Sustaining growth in agriculture is highly important to developing markets, where the sector is a primary source of livelihood. In fact, a large majority of the global agricultural labour force (over 90%) still resides in developing countries. Growth opportunities in agriculture spread across production and consumption. They enable farmers to be more efficient and deliver higher yields while addressing the ever-changing food and drink preferences of consumers.
2. Health & Education
Pushed by the need to cover large infrastructure and resource gaps, we expect health expenditure to grow by 10.7% annually in developing economies versus a low 3.7% in developed economies by 2022. The opportunity size for maturing markets is also supposed to reach USD 4 trillion in annual spend by 2022 – opening new doors for life sciences companies, medical device manufacturers, pharmaceutical companies and delivery service providers.
Also, digital health is emerging as a growth sector worldwide, garnering USD 13 billion in investments over 2014 and 2015. Unsurprisingly, we expect the adoption of technology-driven solutions to increase, with growth markets looking at low cost and less resource-intensive options to bridge existing gaps.
Growth markets are now responsible for almost 60% of all low and medium technology manufacturing worldwide. Even more noteworthy is the speed at which these markets have grown their share in high-tech manufacturing – accounting for almost 50% of manufacturing value-add globally. We think that the introduction of new production technologies and changing cost dynamics will influence global manufacturing competitiveness in the coming years.
4. Retail & consumer goods
Domestic consumption is one of the most important factors in keeping a growth market’s economy moving upward. This is driven by the expansion of the middle class, who have a higher propensity to pay for quality and value, therefore boosting opportunities across the sector, particularly for discretionary and aspirational products such as clothing, entertainment, leisure and automobiles. Up until 2010, 46% of the world’s middle class lived in growth markets, but by 2020, this will have increased to almost 70% and to nearly 80% by 2030.
5. Financial services
Expanding access to financial services among households will be key to improving the availability of domestic growth capital in growth markets. This can be achieved through technological investments, which are key to improve reach and accessibility to financial services; alternative payments such as non-cash transactions; and the launch of non-traditional sector participants such as e-commerce companies and mobile operators.
6. Transport & communications
Connectivity is fundamental to growth in any country, but in many growth markets the scale and quality of connectivity infrastructure, across both transport and communication is below what is needed to facilitate and sustain high growth. This presents many opportunities to venture into areas such as improving road connectivity, increasing third-party logistics services, and in increasing mobile and Internet penetration in both urban and rural communities in maturing markets.
What we think
Growth markets are not ‘volatile’ in the developed markets sense, but rather ‘maturing’. While growth markets may experience fast growth in their formative years, their rates of growth will vary along their journey to becoming developed market economies. And we need to get used to this. Their institutions will continue to strengthen through this journey, enabling them to recover from each drop in growth quicker than the previous time. These are the characteristics of growth markets. As a large part of the growth of Luxembourg will come from growth markets, we need to understand how these markets are performing and the risk they might represent for financial services and for other sectors like manufacturing, retail and ecommerce.
Read the full report “Winning in maturing markets”.
 International Monetary Fund, World Economic Outlook, October 2016.
 Business Monitor International, 2016.
 World Economic Forum, Health Systems Leapfrogging in Emerging Economies, January 2014.
 StartUp Health Insights, Digital Health Funding Rankings, 2015, 2016
 PwC and Switzerland Global Enterprise, Rising Middle Class – Global Outlook and Growth Potential, April 2015.