Context for Global Growth

and Development
Extracts from McKinsey Global Institute research for UN
Session on Financing for global sustainable development

James Manyika

November 2014

CONFIDENTIAL AND PROPRIETARY

Any use of this material without specific permission of McKinsey & Company is strictly prohibited
GDP per capita is rising faster and at greater scale than ever before

Population at start
Years to double per capita GDP1 of growth period
Country Year Million
1700 1800 1900 2000

United Kingdom 154 9

United States 53 10

Germany 65 28

Japan 33 48

South Korea 10 27

China 12 1,023

India 16 840

1 Time to increase per capita GDP in purchasing power parity (PPP) terms from $1,300 to $2,600.
SOURCE: Angus Maddison; University of Groningen; Resource Revolution: Meeting the worlds energy, materials, food,
and water needs, McKinsey Global Institute, 2011.
 Nearly 2 billion people will join the consuming class by 2025

World population, Billion

<1% 3% 7% 13% 23% 23% 36% 53% Share of population
in consuming class

1.0 1.3 1.6 2.5 3.7 5.3 6.8 7.9 Consuming class
Below consuming class
4.2

2.4

0.9 1.2
<0.1
0.1 0.1 0.3

1.0 2.2
1.2
1.5 2.8
3.7
4.0
4.4

1820 1870 1900 1950 1970 1990 2010 2025

SOURCE: Homi Kharas; Angus Maddison; McKinsey Global Institute Cityscope 2.0 2
By 2025, 600 cities will deliver 2/3rds of global GDP 440 of them in
emerging countries delivering nearly half of global GDP growth

Contribution to global GDP and GDP growth1

%
Emerging 4402 Other emerging Emerging Developed 1603 Developed Other developed
large cities small cities small cities large cities
and rural areas and rural areas

GDP, 2010 GDP growth, 4

12 5
100% = 201025 17
$63 trillion RER4 100% = 13
36 $50 trillion RER4
16
Other City Other City
600 600
14
12
47
6 18

SOURCE: McKinsey Global Institute Cityscope 2.0

The Internets contribution to GDP is already significant Aspiring countries

and likely to grow Developed countries

Internet GDP contribution Internet contribution to GDP growth

% of total GDP, 2010 %, 2004-2009

Sweden 6.3 33.0

United Kingdom 5.4 22.7
South Korea 4.6 16.0
Japan 4.0 N/A
United States 3.8 15.0
Germany 3.2 24.3
India 3.2 5.3
France 3.1 17.6
Canada 2.7 10.2
21% Internet
China 2.6 Larger than many 3.4 contribution to
sectors including, GDP growth in
Italy 1.7 12.2
agriculture, developed countries
Brazil 1.5 utilities etc. 2.4 vs. 2.3% aspiring
Russia 0.8 0.9 countries

Mature country average = 3.4

SOURCE: OCDE national accounts, Gartner; Global Insight; OECD; ITU; International Data Corporation; World Health
Organization; ICD; iConsumer US 2010; Euromonitor; H2 Gambling Capital; PhoCusWright; Pyramid Research;
UNESCO; McKinsey Global Institute analysis
Adoption of technology is happening faster than ever

Time to reach 50 million users

38
years

13
years

3 1
years 9 88
year months Days

Radio Television Internet Facebook Twitter Google+

 More Transformational Technologies on the way

Internet, Digitization, Big Data and Analytics, Social Technologies etc

IT and how we use it

+ Changing the building blocks
of everything

Mobile Cloud Internet of Automation of Next-generation Advanced

Internet technology Things knowledge work genomics materials

Machines working for us Rethinking energy comes of age

Advanced Autonomous and 3D printing Energy Advanced oil and gas Renewable
robotics near-autonomous storage exploration and energy
vehicles recovery

SOURCE: McKinsey Global Institute analysis 6

Global flow of Goods, Services, Finance, People and Data are growing
rapidly, most faster than GDP

Value and growth (%) of cross-border flow

2012 value (CAGR 2000-2012)

Goods Services
$17.5 trillion $4.4 trillion

Financial
$4 trillion People
11% 10% 194 million
6% people
2%
52% Data and
communication
21.2 million
megabits/sec

SOURCE: McKinsey Global Institute analysis

7
 Goods
Global flows of goods, services, and finance reached Services
$25.9 trillion in 2012 and could triple by 2025 Financial

Global flows in goods, services and finance over time

$ trillion
Historical development of global flows Scenarios for global flows in 2025
Ratio
over 24% 23% 29% 36% 38% 44% 49%
GDP
85

70

54 50
+59
3.3x
44

2.4x +28
2.1x 36
26
16
18 13
11 10
3 5 6 13 18
8

1980 1990 2002 2012 Slowdown Conti- Gaining

and pro- nuing momen-
tectionism momen- tum
tum
SOURCE: IHS Global Insight; McKinsey Global Institute analysis
Developed economies and China dominate in knowledge intensive flows

Developed
Total knowledge-intensive inflows and outflows, 20121 Emerging
Relative area corresponds to the portion of global inflows/outflows

119 other
United States China Germany
countries

Hong Kong Luxembourg

Japan United Kingdom France South Korea
(China)
Hungary Mauritius

Netherlands Singapore Italy Canada Belgium Mexico Taiwan

Switzerland Spain India Ireland Russia Brazil Malaysia Sweden

ROM
VNM
NOR

ARG

UKR
DNK
TUR

SAU
AUS
THA

SVK
POL
AUT

CZE

CHL

PRT

PHL
ZAF
ISR

FIN
1 A knowledge-intensive flow is a flow with embedded information, ideas, or expertise that is transferred when exchanged. Foreign direct investment is
classed as a knowledge-intensive flow because it often entails the transfer of embedded ideas, management expertise, and technology.
SOURCE: Comtrade; IMF Balance of Payments; McKinsey Global Institute analysis 9
Despite opportunities, some important challenges ahead

Pressure on resources
After effects of Debt and Deleveraging
Inclusive Growth and Job Creation
Growth Challenge and Productivity Imperative

McKinsey & Company | 10