Middle class rising

Middle class rising | Daily Tribune

Manila recently received the distinction of being the ninth most promising city in terms of global economic growth.

Of the world’s 10 key growth hubs, nine are forecast to be located in Asia, according to the Growth Hub Index 2024 by British real estate service Savills.

The ranking goes like this: 1) Bengaluru, India; 2) Ho Chi Minh City, Vietnam; 3) Guangzhou, China; 4) Shenzhen, China; 5) Hyderabad, India; 6) Hanoi, Vietnam; 7) Guangzhou, China; 8) Mumbai, India; 9) Manila, Philippines; and 10) Riyadh, Saudi Arabia.

The cities are set to develop particularly quickly by 2033 based on indicators measuring rising wealth, expanding economies, and the potential for new development and business expansion.

The report highlighted a shift in global manufacturing activity from China to Southeast Asia.

Other features of the report included the situation in which North Asia, Japan and South Korea are aging while Southeast Asia and India are still young and urbanizing.

A common denominator of the 10 emerging global cities is a rising middle class which in the Philippines is a rather recent development.

Many Asian cities have a growing middle class as personal wealth rises across the region.

Investment in infrastructure and strategies to improve connectivity are also among the reasons helping the cities in the standing.

Savills analysts looked at several indicators on economies, populations and wealth across 230 cities with a gross domestic product (GDP) of $50 billion and up in 2023 to identify the fastest growing cities.

The economic indicators include the city’s GDP in 2033 and future credit rating as well as the percentage increase in growth rate between 2023 and 2033.

Wealth creation is much faster in nations with a strong middle class since households under the classification have a higher purchasing power, which fuels domestic consumption and investment.

They also tend to have higher levels of education and skills, making them a vital source of human capital for boosting productivity and competitiveness. A larger middle class can contribute to greater social and political stability by fostering a stronger stake in the nation’s development.

Countries with a large middle class tend to have lower levels of inequality, as the middle class acts as a buffer between the rich and the poor.

The middle class can be a source of domestic demand and a driver of consumption-led growth but the Philippine Institute for Development Studies cautioned that in some developing countries, the middle class may be vulnerable to economic shocks.

Based on the income-based definition, the Filipino middle class has grown significantly over the past three decades.

In 1991, only 28.5 percent of the population belonged to the middle class. By 2021, however, this proportion had increased to 39.8 percent, representing 34.4 million Filipinos.

In 2021, about four out of five (79.5 percent) employed middle-class individuals (15 years and over) had permanent jobs, while less than a fifth (18.9 percent) had short-term or casual employment. In contrast, about a third (31.4 percent) of employed low-income individuals had short-term or casual jobs.

Primary sources of income for middle-class households are wages and salaries (50.6 percent), followed by entrepreneurial activities (24 percent), and overseas remittances (8.3 percent).

Low-income households are more dependent on domestic transfers (10.9 percent) and entrepreneurial activities (31 percent), while high-income households have a higher share of income from overseas remittances (10.1 percent) and wages and salaries (43.8 percent).

A large proportion of Asian cities are also set to record an expanding middle class, as personal wealth rises significantly across the region.

Economists said the intra-regional manufacturing shift from China to Southeast Asia is one of many intriguing subplots being played out.