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Economic silver lining at the base of the pyramid?

Michael Jarvis's picture

It will be intriguing to see how the global economic crisis impacts firms operating at the base of the pyramid. The slowdown suggests that the poor may have even less to spend – the World Bank's Global Economic Prospects forecasts 2009 growth at just 4.5% in developing countries and a recent CGAP discussion highlighted an already visible decline in remittances.

It is possible that multinationals may draw back on investment in low income markets and there are signs of strains on microfinance availability. This might suggest a contraction for BoP markets, and for those seeking to tap new wealth in emerging markets it clearly raises problems. Bloomberg reports India car sales declined 19% last month, the most in more than 5 years. Yet the poor will always spend a high proportion of their income by necessity and this is likely to be supplemented by middle class consumers moving downmarket.

This may present opportunities for BoP suppliers, including those linking to export markets. As reported on CNN it is the discounters like Wal-Mart seeing rising sales at the expense of more upmarket rivals, and for them low cost production is imperative. If that is mirrored worldwide then it could still be good news for those targeting the BoP.

Comments

Submitted by Lisa on
‘Vicious circle of poverty’ theorists are correct again. Poverty might not be in question here, but the theory definitely is. Many Asian markets have seen the decline of the growth of the middle segment that was migrating to high net worth. Discount stores are always a favorite destination for the segments of the population who flock to places where they can save some money.

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