This article first appeared in The Edge Financial Daily on September 19, 2018

KUALA LUMPUR: Global consulting firm McKinsey & Co said global growth can still be sustained at current rate of around 4%, driven by urbanisation, the ageing global population, technological advancements and globalisation.

McKinsey senior partner Dr Jonathan Woetzel said the global economy has seen such unprecedented growth in recent history but he stressed that the growth can continue.

“Will we still see this kind of growth going forward? For Malaysia too, it’s been a terrific time as the country is one of only seven developing economies which have outperformed high-income countries for the last 50 years, so it’s in Malaysia’s interest to understand this as well,” he said during his presentation at 2018 Conference of the Electric Power Supply Industry (Cepsi) yesterday.

According to Woetzel, urbanisation is one of the four growth drivers for the global economy, pointing out that 65 million people are joining the urban economy every year.

By 2025, an estimated three billion of people will join the consumer class.

“These three billion additional consumers in the global economy would be the underlying force for about 70% of global economic growth for the next 30 years. And this, of course, is also the demand that the electricity industry will have to supply to,” he said.

Another driver for global growth is the deployment of advanced technology.

Woetzel highlighted that the world population is ageing, noting that fertility rates have been declining globally for decades.

By 2040, he forecasts, about one in four people in all advanced economies — including China — will be 65 years of age or older.

“For the last 50 years, we grew at 4% per year, globally, and half of that 4% was derived from new people, the younger population entering the workforce.

“Going forward, with one in four people aged 65 years and above, the growth accounted for by the younger population will drop below 1%,” he said.

If the world would like to maintain its pace of growth of around 4% per annum, he said the world would have to be about twice as productive.

This, Woetzel said, will be enabled by technology.

“Technology is now going through an unprecedented moment, where advances in computing power, connectedness, ad data are all coming together and growing exponentially.

“This is what we believe can and will sustain that productivity growth,” he said.

For example, he pointed to American industrial companies in the 1990s, such as Ford Motors, which made US$250 billion in revenue per year with 1.2 million employees, compared to the Silicon Valley companies of today, such as Facebook, which is making US$330 billion (RM1.37 trillion) revenue per year with under 200,000 employees.