A couple years ago DCR TrendLine spent some time covering employment trends in the BRIC (Brazil, Russia, India, and China) economies. In 2015, China shifted to a modest growth rate, and Brazil and Russia’s economies started to decline, leaving room for new economies to emerge at the forefront.
In 2015, we saw the weakest growth ever in the emerging markets. According to the World Bank, the annual growth rate in these markets decreased from 7.6 percent in 2010 to less than 4 percent in 2015. The forecast for 2016 has been revised downward by almost a full percent.
Of the four BRIC economies, only India remains a part of the golden age due to its inward-directed growth and large population. China strives to develop among similar lines and transform from an export-capital investments-driven economy to an economy based on domestic consumption and services. The International Monetary Fund (IMF) predicts a significant slowdown in China’s growth to just over 6 percent, the lowest rate since China began entering the global economy in the early 1990s. Brazil is experiencing its longest recession in a hundred years, with its economy shrinking at a startling pace. And in Russia, low oil prices and a declining currency are having an impact. Russia’s currency, the ruble, has reached a historic low, and the United Nation’s recent “World Population Prospects’” report notes that the country’s aging population is projected to decrease by 10 percent by 2050. The Brazilian and Russian markets have lost 10 percent of their share in world output and are projected to lose another tenth of their share of the total by 2020.
But despite the challenging global environment, some economies are managing to maintain rapid growth. Countries whose growth is fueled by mainly domestic demand from a large population and middle class are better able to face a deepening global recession. According to the World Bank’s yearly projections, growth in commodity-exporting emerging markets fell to less than 2 percent in 2014, while growth in other emerging market economies remained unchanged in the same year. The World Bank forecasts that their annual growth rate of 5.7 percent will increase again in 2016-2018.
The following emerging economies are expected to grow despite the global recession:
Over the past ten years, Ethiopia has been growing at a rate of approximately 10 percent per year due to a steady flow of foreign and local government investment into the agriculture sector. With a lot of land and a large population, Ethiopia is heavily dependent on agriculture, which accounts for 42 percent of the country’s income and the livelihood of 85 percent of its people. Having provided the country’s main industry a boost, the government is now focusing on diversifying by promoting potential growth sectors such as textiles, energy, and service. The World Bank predicts that Ethiopia will grow at a rate of about 9 percent, though the country’s government is aiming for 11 percent, through 2020.
Bangladesh faces problems with corruption, political instability, and rundown infrastructure. Yet despite these challenges, the country has managed to maintain an annual growth rate of approximately 6 percent since 2003. The size of its population, the world’s eight largest at about 170 million, and its age (over half are under age 25), contributes to the rapid and stable growth. Bangladesh’s workforce is about 80 million, seventh in the world, and according to the CIA World Factbook, millions of citizens working abroad bring billions of dollars into the country, accounting for about 8 percent of the GDP. IMF forecasts show that Bangladesh will continue to grow at an average 7 percent annual growth rate, poised to become one of the world’s 30 largest economies by the end of this decade.
Myanmar is one of the most promising emerging markets. The country’s long-standing sanctions that isolated its economy have been lifted, and foreign investors are looking for opportunities in the resource-rich country, especially in energy and infrastructure. Expansions in exports, foreign investment, and private sector demand have contributed to an average 8.5 percent annual growth rate since the start of reforms and lifting of sanctions. Forecasts expect Myanmar to continue to grow at 8 percent per year until 2020.
The Philippines, the subject of a DCR TrendLine article in April 2015, is growing at an average of 6.5 percent since 2012. Over the next year, the Philippines is set for a major boost due to low commodity prices, which will provide more disposable income in the hand of the country’s citizens, increasing their purchasing power and fueling demand. The improving job market and significant cash flow from the millions of citizens working abroad is driving projections of a growth of 6.5 percent in 2016-2017. The country’s low dependence on exports, combined with its strong domestic demand and stable flow of investments has contributed to its rapid growth, which is expected to continue in the upcoming years.
Vietnam, discussed in August 2015’s edition of DCR TrendLine, is another Southeast Asian country predicted to grow. While nearly half of the workforce is employed in agriculture, industrialization and development are speeding up as the country continues to modernize. Vietnam produces more goods and services today than in the past, accounting for about 82 percent of yearly output, while the agricultural share of the GDP has shrunk from 25 percent in 2000 to just 18 percent in 2015. Vietnam’s private sector growth is fueled by its large, growing population and workforce, growing real wages, and stable low prices.
Yet another Southeastern Asian country, Indonesia, is expected to expand. We discussed the country’s workforce challenges in June 2015. The Euromonitor International forecasts that the country’s 17.3 million household middle class will expand to around 20 million households by 2030. Indonesia’s flourishing middle class is driving demand up, which, along with the government’s five-year plan to invest over $400 billion in infrastructure, will lead to a 5.5 percent growth rate in the coming years. Indonesia is already a leading economic power – its purchasing power adjusted GDP is eight in the world, just behind Brazil and Russia. The IMF forecasts that Indonesia will overtake Brazil by 2018 and Russia by 2020.