Middle-class, affluent, bourgeois, white-collar … they all describe a group of people who enjoy a comfortable life, have access to healthcare and, most importantly, have discretionary income. And across developing nations, there is a growing group of affluent people that are just settling in to this lifestyle.
A few weeks ago we discussed how economic power is gradually shifting eastward and highlighted a McKinsey Global Institute report that showed China, Latin America and South Asia are projected to account for most of the middle class children by 2025. (Read: Middle-Class Middleweights to be Growth Champions).
Those regions aren’t the only ones. Our emerging markets team uncovered this chart for last week’s Investor Alert which shows a surging middle class exists in Eastern Europe as well. China leads the developing world with a middle and affluent class of 149 million—roughly the same size as the combined total populations of Japan and Taiwan.
While China is far ahead of all developing market countries with 149 million members of the middle and affluent class, investors shouldn’t overlook another important trend: The combined middle and affluent classes of the Czech Republic, Hungary, Poland, Romania, Russia and Turkey equal that of China. Among emerging market nations, Russia has the second-largest middle and affluent class with 70 million people; Poland’s rivals that of India.
Turkey, which currently ranks seventh, has especially strong prospects. Already, its middle class is second among emerging markets in terms of GDP per capita at $17,586. In addition, this class is expected to grow at a 5.1 percent annual rate through 2029.
The Development Centre of the Organisation for Economic Co-operation and Development (OECD) Development Centre identifies the middle class population as the “consumer class” because of its importance on consumption levels. We agree with this designation as this class identifies an important global driver of economic growth.
We believe that people with discretionary income will seek to improve their way of life by buying their first vehicle, upgrading their home, purchasing appliances and gaining access to the Internet. For years to come, these middle and affluent classes should drive demand for new or improved infrastructure and needed commodities, thereby contributing to the substantial economic growth in several emerging nations around the world.
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