Where to Find Growth in Emerging Markets

With the global economy stuck in a rut in which growth rates for the world as a whole have failed to rise much above 3% for more than four years, exporters and investors are finding it increasingly difficult to find markets that are offering significant growth opportunities.  Just a few years ago, most large emerging markets were the source of most of the growth for exporters and investors, but a combination of events ranging from the end of the United States’ quantitative easing programs to the collapse of natural resource prices brought an abrupt end to this rapid growth in many of these emerging markets.  In fact, countries such as Brazil and Russia have found themselves in deep recessions, while even China has experienced a significant economic slowdown.  As a result, more than half of the growth in economic output over the next 18-to-24 months will come from developed economies, led by the United States.  Nevertheless, some emerging markets are forecast to grow at a healthy pace over the near-term and will provide for significant growth opportunities for exporters and investors.

As has been well documented, India is now the fastest-growing large economy in the world and its improving outlook is driving growth across much of South Asia.  Over the next few years, economic growth rates in India are forecast to range between 7% and 8%, above those of any other large emerging market.  Moreover, this rapid growth in India will help to attract trade and investment, not only to India, but also to much of South Asia.  This will help to boost economic growth rates in countries such as Bangladesh and Sri Lanka, both of which are forecast to record economic growth rates in excess of 6.5% over the next few years.  Meanwhile, the abundance of cheap and increasingly-skilled labor in South Asia will attract significant investment into the region’s manufacturing sector, enabling the region to become an important center of export-oriented manufacturing, the sector that allowed China and many other successful emerging markets to achieve long-term growth and to lift hundreds of millions of people out of poverty.  Moreover, South Asia is home to flourishing service and IT sectors, both of which will grow significantly in the years ahead.

Another region where growth markets will be found by exporters and investors in the coming years is Southeast Asia, a region that is home to more than 660 million people.  While some of Southeast Asia’s leading economies will grow at a relatively sluggish pace over the next few years, other countries in the region are set to record economic growth rates in excess of 6% per year.  For example, the Philippines has been one of the fastest-growing economies in the world in recent years and growth rates in the Philippines are forecast to average 6.5% over the next few years.  Vietnam is another economy in this region that will grow at a similar pace in the years ahead as it becomes one of the world’s leading low-cost manufacturing centers.  Finally, Myanmar’s political reforms are opening the doors for a major increase in exports and investment into that country and this will allow for Myanmar’s economy to grow by more than 8% per year over the remainder of this decade.  Altogether, it will be Southeast Asia’s less affluent economies that drive growth in this region over the near-term, enabling the region to emerge as a key center of the global economy in the years ahead. 

While South and Southeast Asia already attract high levels of trade and investment, East Africa is a lower profile region that has the potential to grow at a significant pace in the coming years.  This is due to the sound economic policies that have been enacted in most of the region’s leading countries, as well as the increasing integration of the region’s economies.  Forecast economic growth rates in the region are generally high, with Mozambique and Ethiopia expected to average nearly 8% GDP growth per year, Tanzania and Kenya nearly 7%, and Uganda 6%.  Two areas that are already attracting significant investment are the region’s natural resource industries and its infrastructure, as some of Africa’s most ambitious infrastructure projects are being launched in East Africa.  Moreover, as the home of more than 275 million people (and a rapidly-expanding population), East Africa has the potential to become a significant market for exporters as purchasing power levels in the region rise at a fast pace.  As a result, East Africa is in a position to be another source of growth in an otherwise sluggish global economy.