World economy and emerging markets

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November/December 2012
Broken BRICs — Why the Rest Stopped Rising
(Foreign Affairs) At first they were known as the BRICs — Brazil, Russia, India, and China — the large, rapidly growing developing states ready to remake the world economy. Now, Indonesia and others have been added to the list. But few can say if these new powers will overcome their own challenges, and more, if they will accept the current world order, or change it.
The notion of wide-ranging convergence between the developing and the developed worlds is a myth. Of the roughly 180 countries in the world tracked by the International Monetary Fund, only 35 are developed. The markets of the rest are emerging-and most of them have been emerging for many decades and will continue to do so for many more. The Harvard economist Dani Rodrik captures this reality well. He has shown that before 2000, the performance of the emerging markets as a whole did not converge with that of the developed world at all. In fact, the per capita income gap between the advanced and the developing economies steadily widened from 1950 until 2000. There were a few pockets of countries that did catch up with the West, but they were limited to oil states in the Gulf, the nations of southern Europe after World War II, and the economic “tigers” of East Asia. It was only after 2000 that the emerging markets as a whole started to catch up; nevertheless, as of 2011, the difference in per capita incomes between the rich and the developing nations was back to where it was in the 1950s.
This is not a negative read on emerging markets so much as it is simple historical reality. Over the course of any given decade since 1950, on average, only a third of the emerging markets have been able to grow at an annual rate of five percent or more. Less than one-fourth have kept up that pace for two decades, and one-tenth, for three decades. Only Malaysia, Singapore, South Korea, Taiwan, Thailand, and Hong Kong have maintained this growth rate for four decades. So even before the current signs of a slowdown in the BRICs, the odds were against Brazil experiencing a full decade of growth above five percent, or Russia, its second in a row.

Once-lagging economies are envy of recession-mired West
This series by The Guardian spotlights developing countries currently undergoing booms in growth that could vault them past wealthier nations in economic might within decades. “As the West remains mired in gloom and even the BRICs start to plateau, attention is turning to this group of countries, many of which not so long ago were rudely dismissed as basket cases,” writes economics editor Larry Elliott. The Guardian (London) (12/18)

Developing economies to be bigger than developed within 50 years

China will overtake the U.S. as the world’s largest economy within four years, setting the stage for developing economies to surpass the developed world within 50 years and quadruple the incomes of those citizens, according to the Organization for Economic Co-operation and Development. “It is quite a shift in the balance of economic power we are going to see in the future,” said OECD senior economist Asa Johansson. The Guardian (London)/Datablog (11/9), The Guardian (London) (11/9)
The world in 2060 — The OECD’s forecasts
(The Economist) the OECD’s projections for 2060 (at constant purchasing-power parities) show the impact of fast catch-up growth in underdeveloped countries with big populations. Economic power will tilt even more decisively away from the rich world than many realise. In 2011 the current membership of the OECD made up 65% of global output, compared with a combined 24% for China and India. By 2060 the two Asian giants will have a 46% share of world GDP, the OECD members a shrunken 42%. India’s economy will be a bit bigger than America’s, China’s a lot.
Even so the Chinese and Indians will still be much less well-off than Americans (see chart). The same forecasts show GDP per person in China at 59% of that in America; in India it will be only 27%. And Americans will increase their lead over the citizens of some developed countries like France and Italy.
Tony Deutsch comments: This is a riskless forecast, since the people producing it are highly unlikely to be here to answer for inaccuracies. Its value lies in showing what can be reasonably anticipated about what we know now.
8 November
China to overtake US as top economy by 2016: OECD
(Emerging Markets) The US is likely to cede the top spot to China in the next three years while India will also surpass the US over the long term, an OECD report said
Emerging economies are getting bigger share of UN business
More United Nations business is being done with emerging economies, notably India and Russia, even as the U.S. and Switzerland remain atop the list. Five years of data released by the UN Office for Project Services provides a look at how the world body spends its money. “The more all stakeholders can see and understand how development funds are used, the greater the chance is that these limited resources will be used effectively,” said Vitaly Vanshelboim, UNOPS deputy executive director. The Guardian (London) (11/7)
2 August
Can emerging markets thrive while the rich world is weak?
(Economist Intelligence Unit/subscription) As the global economy slows, many emerging markets are feeling the pinch as demand for their exports weakens. In some cases—notably in China—domestic policy is also contributing to the economic slowdown. The broader question is whether these are mainly cyclical developments or the prelude to a structural adjustment in which emerging markets will no longer sustain the spectacular growth rates of recent years. The answer is probably a bit of both.
14 July
Conrad Black: BRIC’s spectacular rise, not so spectacular after all
(National Post) I have devised a scale composed of economic growth, political maturity or progress, coping with geographic and geopolitical circumstances, current standard and quality of living. (It is admittedly a bit arbitrary, but statistics can be used to prove anything anyway, like Biblical quotations.) And on the basis of it, I have devised a new acronym, necessarily more complicated than BRIC, but more accurate also: KING’S TRIPLE-C GEM — referring, of course, to Korea (South), Indonesia, Norway, Germany, Singapore – (KING’S); Turkey, Rwanda, Israel, Panama, Lithuania, Equatorial Guinea, Canada — (TRIPLE-C); and Ghana, Estonia, Mozambique — (GEM). In the last full year for which there are reliable numbers, all but Canada, Germany, and South Korea had GDP growth of over five per cent, and all appear to be holding their position better than BRIC.
Germany deserves inclusion for radical progress on unemployment, resistance to the Euro-pandemic of fiscal and monetary idiocy, and standing almost alone against the collapse of the Euro-project. South Korea as an entirely manufacturing economy, and Canada as a multi-resource economy, make the top group for fiscal responsibility and sustainable unemployment in poor economic conditions (as well as, in Canada’s case, the rank partisanship of a temporary residence permit-holder). Norway makes it for low unemployment, staying out of Europe, and being a civilized oil exporter
The acronym is certainly awkward, and I would have added Finland if I could have fitted in an “F.”
Not everyone agrees with Mr. Black – see Comments on the NP page – but we cannot fault him for lacking stimulating thoughts.
12 July
UNDP Predicts Rise of the Global South
(IPS) – When the U.N. Development Programme (UNDP) unveils its annual flagship Human Development Report (HDR) in mid-October, the primary focus will be on a growing new phenomenon on the economic horizon: the rise of the global South and the significant progress in South-South cooperation over the last decade.
The developing world maintained an average annual gross domestic product (GDP) growth rate of 4.8 percent during the last 10 years, and now accounts for around 45 percent of global GDP.
And in 2010, developing and emerging economies recorded an average growth of 7.3 percent, “which was significantly greater than that of economies in the North,” says UNDP Administrator Helen Clark.
17 June
Fears mount over of emerging market euro contagion
Rapid “mood swings” in capital flows have hit emerging markets hard as G20 nations struggle to contain euro crisis fallout
Emerging markets are being hit by massive outflows of capital amid growing fears of an imminent credit crunch that could lead to a long term and damaging impact on global capital flows and investment as G20 leaders struggle to contain the impact of the euro debt crisis.
Experts warn that “rapid mood swings” in capital flows have created global financial turbulence that is affecting not only bank loans and portfolio investment flows but also longer-term direct investment in business, which is the backbone of economic growth in many emerging economies.
8 June
Cracks in the BRICs
(Financial Post) Investors have fled Brazil, Russia, India and China in droves this year — so quickly that the MSCI BRIC index took just three months to fall into a bear market. But amidst the steep selloff, analysts are turning very bullish on stocks in the four BRIC countries.
… the BRIC economies appear to have hit a wall this year. Disappointing growth in the first quarter has inflated worries that their once seemingly unstoppable economies are slowing. India is battling inflation and an ineffective government, energy dependent Russia is facing the prospect of low oil prices, China is pulling strings to desperately try to avoid a hard landing, and Brazil’s economy posted a dismal first-quarter GDP growth rate of only 0.8%.
5 May
Marek Belka: New world order
Marek Belka is Governor of the Bank of Poland. This is an edited extract of his speech delivered to the EBRD annual meeting.
(Emerging markets) The West has lost its monopoly on wisdom. But emerging economies can contribute towards new models of growth, finance and regulation
The umbrella term “world crisis” hides a great deal of heterogeneity. The crisis did not occur everywhere: some countries were its sources, others felt its spillover effects. A novel thing is that the crisis was and mostly is an issue for developed economies. …
Growth is no doubt our most pressing need. Its financing model in many countries has to change. This requires new institutions and change in policies. Some countries require more effort, some perform better and modest modifications may be sufficient.
Countries in a greater need of repair should proceed in such a way so as not to bring more harm to those that had already been harmed by the external effects of the crisis in mature economies. Moreover, the former could use the experience of the latter to a much greater extent.

2011

14 November
Obama to China: Behave like “grown up” economy
(Reuters) APEC said in a final communique: “We recognize that further trade liberalization is essential to achieving a sustainable global recovery in the aftermath of the global recession of 2008-2009.”
The communique also expressed a firm resolve “to support the strong, sustained and balanced growth of the regional and global economy” — a clear reference to U.S. concerns about a huge trade deficit with China’s export-driven economy, fiscal problems in developed nations and the low savings rate in the United States.
27 October
China says emerging economies will not play ‘Good Samaritans’ to Europe
(The Guardian) China welcomes the eurozone debt deal but declines to reveal what role it will play in the bailout
27 August
Emerging economies shouldn’t rely on dollar: economist
(Reuters) – Emerging economies should find other ways to buffer themselves from global crises than stockpiling U.S. government debt, a prominent economist argued on Saturday. … Emerging countries seeking protection from global shocks by individually stocking up on U.S. debt would be better off banding together to create a pool of funds that could be drawn on in a crisis, he argued. Doing so would give them a backstop should they need it, without saddling their national investment portfolios with debt that could turn sour.
30 June
Some like it hot — Which emerging economies are at greatest risk of overheating?
(The Economist) WHEN the term “emerging markets” was coined 30 years ago by Antoine van Agtmael, then at the World Bank, these economies accounted for one-third of global GDP (measured at purchasing-power parity). Now they make up more than half. More dramatic still, emerging markets produced more than four-fifths of global real GDP growth over the past five years.
15 June
The global order fractures as American power declines
(FT) The US finds it increasingly hard to drive forward its vision of international trade over the objections of big emerging-market countries
30 June
Emerging Markets Economic Forecast 2011: “In each of these countries, more people are entering the middle class driving demand for consumer goods and better food. For example, Brazilians bought 4.5 million cars in 2009, twice what they purchased in 2003. The Chinese bought more cars in 2010 than sold in the United States. The upper class will expand as well creating more demand for higher end goods.”
8 June
World Bank warns inflation a threat in emerging markets
Too many of the world’s fast-growing developing countries are deploying crisis-fighting policies even though their economies have recovered from the recession, exacerbating inflation, the World Bank says it its latest economic assessment. Bloomberg World Bank Urges Rate Rises in Emerging Nations With Global Growth at 3.2%
These policies are fueling inflation and risk upsetting the global recovery. Low- and middle-income countries were responsible for 46 per cent of the growth in global gross domestic product in 2010, and will continue to power the world economy for the next several years, the Washington-based institution says in the June edition of “Global Economic Prospects.”
Most economies in Asia and Latin America are growing faster than economic models suggest is possible without stoking inflation, the World Bank said. Yet authorities in these countries continue to keep interest rates relatively low, and few governments have made plans to return their budget balances to pre-crisis levels over the next few years.
7 June
Can Emerging Markets Save the World Economy?

By Mohamed A. El-Erian and Michael Spence
(Project Syndicate) Over the past two years, industrial countries have experienced bouts of severe financial instability. Currently, they are wrestling with widening sovereign-debt problems and high unemployment. Yet emerging economies, once considered much more vulnerable, have been remarkably resilient. With growth returning to pre-2008 breakout levels, the performance of China, India, and Brazil is an important engine of expansion for today’s global economy.
15 April
Wael the Plumber: Egypt’s Google revolutionary mixes it up at the IMF
(Foreign Policy) Along with cherry blossoms, spring means IMF annual meetings here in Washington along with some always intriguing panel discussions. The most highly anticipated talk at this year’s confab was this morning’s roundtable on “Youth, Jobs, and Inclusive Growth in the Middle East and North Africa,” featuring IMF Managing Director Dominique Strauss-Kahn, Columbia University professor and Middle East Channel contributor Rashid Khalidi, the International Labor Organization’s Nada al-Nashif, Tunisian Central Bank Governor Mustapha Nabli, and Egyptian Google executive-turned-revolutionary Wael Ghonim.
The real topic of debate was the IMF’s past role in lending to autocratic regimes in the Middle East and whether it would expand its mandate to include job creation, economic equality, and good governance, in addition to more traditional macroeconomic indicators. Strauss-Kahn, on the defensive for most of the panel, seemed to promise they would.
7 March
IMF: Signs of overheating in emerging markets
(Reuters) – Emerging market economies that powered the global recovery may be growing too fast for their own good as inflation pressures build, a top International Monetary Fund official said on Monday.
China, Brazil and other fast-growing nations have struggled to contain inflation and control heavy inflows of investment money. Although the IMF has been warning for months of the risks of price pressure, the comments by the Fund’s first deputy managing director, John Lipsky, suggested the IMF is growing increasingly concerned.

2010

December 2010
McKinsey Quarterly: How the growth of emerging markets will strain global finance
Surging demand for capital, led by developing economies, could put upward pressure on interest rates and crowd out some investment.
… as developing economies continue to pick up the pace of urbanization, the prognosis for companies that can tap into that growth over the next decade looks promising.
Yet all those new roads, ports, water and power systems, and other kinds of public infrastructure—and the many companies building new plants and buying machinery—may put unexpected strains on the global financial system. The McKinsey Global Institute’s (MGI) recent analysis finds that by 2030, the world’s supply of capital—that is, its willingness to save—will fall short of its demand for capital, or the desired level of investment needed to finance all those projects.1 Indeed, household saving rates have generally declined in mature economies for nearly three decades, and an aging population seems unlikely to reverse that trend. China’s efforts to rebalance its economy toward increased consumption will reduce global saving as well.
7 December
Stop call them “developing countries”
(Gapminder) The term “Developing Countries” might have made sense once.
Today it’s impossible to make a clear distinction between “developing” and “developed” countries.
Fascinating interactive graphs: Click play to see how the world has changed since 1950.
7 October
Developing countries fear raw deal on IMF reform
(Emerging markets) Emerging nations yesterday stepped up their demands for greater representation in the IMF, amid fears major world powers are selling short the developing world
Privately, developing countries’ representatives said that even the proposed deal on board seats would not solve the basic issue – that representation based on GDP (market exchange rates) condemns poor and middle-income countries to under-representation.
28 July
Meet the world’s next growth engine
(Financial Post) While the developed world grapples with the mass retirement of its baby boom generation, India is just welcoming its boomers into the workforce.
There, a demographic bulge will lead to an enormous labour force spike in the coming years, presenting India with a profound opportunity for economic growth.
And while the challenge for the country’s planners is equally monumental, the rest of the world needs to ready itself for an era of relentless Indian expansion.
Developing economies gain new leverage in World Bank
In a meeting of the World Bank in Washington, the U.S. and Japan agreed to give up a share of their voting rights over the direction of the international lending institution in order to increase the authority of developing countries. The shift gives developing countries just over 47% of the vote and increases the vote share of countries such as China — which is now the World Bank’s third most influential member. Ministers from South Africa and Brazil argued that the changes do not go far enough to increase the clout of economically vulnerable countries and that the shift of power toward China comes at the expense of diluting their own authority. Deutsche Welle (4/25) , Reuters (4/25)
17 April
BRIC signs pact to facilitate cooperation between development banks
(sify news) The agreement seeks to establish mechanisms to enhance trade and economic relations between BRIC countries.It also includes the possibility of co-financing projects of common interest in areas such as infrastructure, energy, industry, high technology and export.
16 April
BRICs take baby steps toward greater global clout
BRASILIA (Reuters) – The world’s leading emerging powers’ assertive tone in demanding more clout in global financial institutions and setting of a deadline for the reforms shows they are slowly becoming a more potent group.
In a joint statement at the end of their second summit, the so-called BRIC nations of Brazil, Russia, India and China called for swift reforms of the World Bank and the International Monetary Fund to give a greater say to developing nations.
… the timing of the united front before this month’s G20 finance ministers and IMF meetings in Washington and a November deadline for the reforms to be completed showed a growing confidence and cohesiveness, analysts and diplomats said.
Huge differences in national goals and tensions in security and economic policy have prevented the BRICs from agreeing concrete cooperation in most areas. They have rowed back from talk last year of setting up a new reserve currency to rival the U.S. dollar and have made no headway on forming joint institutions.
Emerging Powers Cooking Up New International Order
Since the emergence of the Non-Aligned Movement, there has been no louder and more compelling call for a rethinking of the international economic system as the one issued this week in Brazil by the leaders of the main emerging powers.
In the space of one day, Thursday Apr. 15, two meetings destined to have broad repercussions were held in Brasilia: the summits of the leaders of the IBSA (India, Brazil and South Africa) and BRIC (Brazil, Russia, India and China) groups.
Some questions that have reemerged on the agenda are development with social justice, South-South cooperation, and the steady weakening of the dollar as a reference currency in trade transactions among emerging powers.
Brazilian President Lula: BRIC countries must forge a transparent system of global governance
(CSM) Brazilian President Lula weighs in on the BRIC summit where Brazil, Russia, India, and China showed they are committed to building a joint diplomatic and creative approach to world issues.
The international scene is cluttered with old problems, even as new ones emerge. Neither the BRIC members nor any other countries are able to face them alone. In the past, unilateralism has led to impasses, if not human catastrophes, such as Iraq.
In today’s world, we must therefore rely increasingly on each other. For that to happen we must forge a more representative and transparent system of global governance that can both inspire unity of purpose and revitalize the collective will to seek consensual solutions. In this journey toward a new world, the BRIC countries are committed to working together to fulfill our responsibilities.
The BRICs: Plotting a New World Order?
(TIME) Whenever the BRICs have a powwow, as they did during their second summit this week in Brasilia, I can’t help thinking about the future of the global economy. After all, the BRICs – that’s Goldman Sachs-speak for the four great emerging economies of Brazil, Russia, India and China – in many ways represent that future. There’s something that smells inherently revolutionary, or at least counter-culture, about these summits. Rather than meeting in a global forum such as the G20, with the developed world included, the fact that these four up-and-comers go out of their way to huddle on their own leaves the impression that they’re plotting what the world will look like when they’re in charge.
BRIC With The Taste Of Turkey
‎(Forbes) Federated Investors senior vice president Audrey Kaplan anticipates strong GDP growth in China, Brazil and Turkey for the long term. … if you look at Asia (ex-Japan) and Latin America, countries in those regions had financial crisis in the ’80s in Latin America and in the ’90s in Asia. They learned from those crisis periods and they kept their country balance sheets in much healthier positions. They grew their government reserves, and therefore, they were able to follow strong fiscal and stimulus policies. So the developing countries went into the crisis in a much stronger position than the U.S. and other developed nations. When we look beyond 2010, and we have a very long-term view — we’re looking out as far as 2015 to 2019–we expect developing markets to continue to produce strong growth such as over 8% annual GDP growth in China and over 4.5% and 4.8% respectively in Brazil and Turkey.
15 April
Emerging Powers Eager to Get Down to Business
(IPS) – Members of the business communities of Brazil, China, India, Russia and South Africa wasted no time in stating loudly and clearly what they were there for, ahead of the speeches their presidents will deliver at summit meetings this week.
Energy, information technology, infrastructure, food and agribusiness are the sectors that some 400 commercial delegates identified as priorities in terms of business opportunities.

2009

Moving Up BRIC by BRIC
LONDON, Sep 4 , 2009 (IPS) – Every one of these ‘G’ meetings becomes now an occasion for the developing countries – say the emerging economies – to turn that extra energy into a louder voice in the business of global decision-taking.
… on the eve of the substantive part of the G20 finance ministers meeting in London Saturday, the BRIC nations came together to make a collective announcement that would both inform the formal meeting in advance of common positions, and pre-empt increased pressure from the developed – the G8 part of the G20.
For the record, the G8 are the U.S., Canada, Britain, France, Germany, Italy, Japan and Russia; the G5 are Brazil, India, China, South Africa and Mexico; and BRIC are Brazil, Russia, India and China. The remaining members of the G20 are Argentina, Australia, Indonesia, Saudi Arabia, South Korea, Turkey and the EU represented by its rotating presidency (currently Sweden).

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