As urban world is moving towards the developing world, GlobalData, a leading data and analytics company, forecasts that 88% of the world megacities will be based in developing economies of Asia, Europe & Central Asia, Latin America and Middle East & Africa by 2025.

Out of 44 megacities in the developing world, GlobalData has identified 26 megacities that will outperform developed megacities by 2025. The company forecasts that the share of emerging megacities to the world’s gross domestic product (GDP) will increase from 7.2% in 2018 to 8.3% in 2025 while the share of developed megacities to the world GDP will decline from 8.1% to 6.8% during the period.

Emerging megacities to drive economic growth

All developed megacities, except Osaka, will become trillion-dollar economies in 2025 with Tokyo leading the trillion-dollar club with expected GDP of US$2.05 trillion, followed by New York (US$1.96 trillion), Los Angeles (US$1.20 trillion), London (US$1.12 trillion) and Paris (US$1.09 trillion) in 2025.

However, the maximum growth will come from cities in the developing world. By 2025, seven emerging megacities will have GDP over US$0.5 trillion. Shanghai will lead the table with GDP close to US$0.85 trillion, followed by Beijing (US$0.78 trillion), Mexico City (US$0.68 trillion), Shenzhen (US$0.67 trillion), Chongqing (US$0.61 trillion), Guangzhou (US$0.57 trillion) and Moscow (US$0.52 trillion). Riding on the back of good economic growth, emerging megacities from India are expected to show maximum growth between 2018 and 2025 with Mumbai registering the fastest growth of 126.3%, followed by Hyderabad (109.8%) and Bangalore (105.5%) during the same period.

Growing consuming class to give edge to emerging megacities

Tarun Bisht, Economic Research Analyst at GlobalData, says: “Emerging megacities have a demographic advantage over developed megacities as the population in emerging megacities is significantly younger than developed megacities. Increased education levels and employment opportunities have led to the rapid urbanization of emerging megacities which is boosting consumption as people move to cities and join the growing consuming class.”

The working age population of emerging megacities is expected to grow at 8.3% between 2018 and 2025, compared to 1.0% growth of developed megacities during the same period. Furthermore, rising prosperity in these megacities has also enabled the emergence of a new wave of middle and affluent consumer classes, which aspire for better standards of living.

Consumer spending in emerging megacities is approximately US$4.2 trillion purchasing power parity (PPP) and GlobalData expects this amount to increase to US$6.3 trillion (PPP) by 2025, with 44% of it coming from megacities in China and India. Moreover, these megacities will be home to approximately 109.2 million households with an average income of more than 20,000 Int’l$ (PPP) by 2025.

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Bisht concludes: “Though emerging megacities have taken major strides in improving some of the key metrics of development such as education level, life expectancies, infant mortality and gender inequality; employment generation, poverty reduction and monetary inequality still remain a major challenge for sustained economic growth.”