Taking Stock of Population Growth Headwinds

Roland Czerniawski: Population growth is one of the main drivers of long-term economic growth. In this week's video, we're taking a look at historical world population growth rates as well as their forecasts.

Going back to 1955, developing economies, also known as emerging markets, were in the midst of a population boom that culminated in a peak growth rate of around 2.5% in the late 1960s.

At the same time, developed economies were already experiencing a decline from a modest 1.2% rate. It is worth mentioning that at this point developed economies accounted for about 30% of the world population, while emerging markets comprised the remaining 70%.

The following decades up until today saw a gradual decline in population growth rates in both developed and emerging economies, caused by gradually declining fertility rates. The average number of children per woman declined from a world average of 5 in the 1950s to 2.5 in 2015. As a result, today's world population growth rate stands at around 1.2%.

Current population growth for developed economies is even lower, as fertility rates in many European countries and Japan have declined dramatically. Developed economies make up only 16% of today's world population.

The United States accounts for about a quarter of the developed world population, and among those nations it leads in terms of population growth, which today stands at around 0.7%. This makes the U.S. long-term economic outlook more advantageous versus other developed economies.

Going forward, fertility rates are expected to decline further, and world population growth is expected to fall to 0.5%, while population growth for the developed economies is expected dip into negative territory in the 2040s.

Certainly, with falling population growth comes slower economic growth. Investors should be aware that declining demographic trends already have and will continue to have an impact on world long-term economic growth.