Budgeting for Austerity, and New Opportunities

New Normal logo.pngSUMMARY
The global economy does not seem to be in good shape.

Policymakers seem to fail to grasp the importance of the demographic changes that are underway in both the Western and emerging economies.

Yet demographics drive demand.

The result of this failure by policymakers is that the world seems to be heading towards a period of austerity.

In the short-term, there is probably little than any of us can now do to change this outcome. So companies need to prepare themselves to survive what might happen next.

But they also need to remember that the greatest opportunities come at the time of greatest challenges.

Two vast, and virtually unserved markets are now opening up. And they will continue to grow, no matter what happens in financial markets.

This is the wonderful thing about population data – we already know within reasonable accuracy how many people will be alive in 5 and 10 years time, and how old they will be. The reason for this accuracy is that most of them have already been born.

So forecasting has a sound basis from which to work.

It tells us that in 2015, for the first time ever, there will be 300 million western BabyBoomers (those born between 1946-70) in the 55+ age group. They will have money to spend, and an extra decade of life expectancy ahead of them, compared to earlier generations.

Separately, hundreds of millions of people in the emerging economies will be moving out of poverty. They will have small amounts of money to spend for the first time. They will want to spend it on critical needs, and in a sustainable fashion.

The chemical industry is key to ensuring that the needs of these two growth markets are met. This is the great opportunity of the New Normal.

Budgeting for the 2012-14 period is therefore even more complex and critical than usual. Tuesday’s blog will discuss the Challenges we may face as a result of a slowing global economy and rising austerity. Wednesday’s blog will then highlight the Opportunities in more detail.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. The aim of this blog is to share ideas about the influences that may shape the chemical industry over the next 12 – 18 months. It will try to look behind today’s headlines, to understand what may happen next in important issues such oil prices, economic growth and the environment. We may also have some fun, investigating a few of the more offbeat events that take place from time to time. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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