NBKC Strategy Note – Demographic Shifts

Kuwait: February 13, 2017

Inflation and Interest rates have been on a declining trend for more than 3 decades


  • World population growth is slowing down, fertility rates across the globe are dropping and people are living longer. This is causing a major shift in the composition of the world population as older cohorts are forming an increasingly higher percentage of the total.
  • With fertility rates in the EU at 1.5, the United States at 1.9 and China at 1.6, the largest global economies are already below the long term average maintenance rate of 2.1.
  • An aging population combined with a low birthrate present serious pressures on governments and household finances as they struggle to secure appropriate healthcare and elderly care services expenses and keep pensions funded.
  • The implications of such shifts are wide reaching. There is mounting evidence that an aging population is impacting levels of productivity, spending and saving behaviors, inflation levels and ultimately general economic growth.
  • Long term trends of economic indicators seem to be pointing to a structural paradigm shift. Inflation and Interest rates have been on a declining trend for more than 3 decades.
  • The global economy has been registering low single-digit growth rates for the past 5 years and is currently expected to stay around these levels for at least another 5 years.
  • Going forward, economic growth would be driven more by increases in productivity and less by leverage, hence reducing the volatility of GDP growth rates in addition to smoothening and extending economic cycles.