emerging
Diminishing Global Savings Glut
The global savings glut, a key driver of economic and financial dynamics in recent decades, is expected to decline or disappear in the next five years, potentially impacting interest rates, currency valuations, and investment opportunities.
Timeframe
near-term
Categories
Subcategories
Detailed Analysis
The report argues that several factors are converging to diminish the global savings glut. China's increasing domestic investment needs, coupled with its slowing contribution to global growth, are expected to reduce its excess savings. Similar trends are anticipated in other emerging economies and oil-exporting countries. Furthermore, rising global capital formation, driven by factors such as resilience investments and the green transition, is increasing the demand for savings. Geopolitical fragmentation and population aging are also contributing to a decline in the net supply of savings.
Context Signals
China's contribution to global growth is projected to fall from 1% to 0.6% by 2030.
The green transition requires capital investments equivalent to 8.8% of global GDP between 2026-2030 (McKinsey, 2022).
Tobin's Q is now above 1, incentivizing companies to invest in capital goods rather than pursuing expensive acquisitions.
Edge
A reduced savings glut could lead to a weaker US dollar, potentially benefiting the US economy through increased domestic demand and job creation.
The shift in savings-investment dynamics could create new investment opportunities in emerging markets and sectors related to the green transition.
The decline of the US dollar's 'exorbitant privilege' could force greater fiscal discipline in the US and reduce global financial imbalances.
