New-wave economies going for growth; as even Brics plateau, other countries, from Bangladesh to Mexico, are coming up fast - and could overtake the west by 2050
Bangladeshi migrant workers line up to enter a construction site in Kuala Lumpur of Malaysia in 2011. Photo: Khabar South Asia
Global economists forecast that trend shows that the economy of Bangladesh might overtake western countries by 2050.The forecast came at a report published by 'The Guardian' on December 18.
Bangladesh has been helped by remittances sent home from expatriates working overseas, the report added.
In anticipation, the Guardian launched a three-day series throwing the spotlight on several of these fast-growing countries like Bangladesh, Pakistan, Vietnam, Philippines, Indonesia, Turkey, Egypt, Iran, South Korea, Mexico, Argentina and South Africa including the famed Brics (a grouping acronym of Brazil, Russia, India and China).
They are big. They have young and growing populations. They have invested in infrastructure and education. And they are growing at the sort of rates that make them the envy of the recession-hobbled west, the report added. Bangladesh is one of them, it added.
No, these are not the famed Brics economic – the big emerging market economies of which much has been heard since the acronym was first coined by Jim O'Neill of Goldman Sachs (an American multi-national investment banking firm engaged in providing financial services) more than a decade ago. Rather, they are a second wave of countries – some Asian, some Latin American, some African – coming up fast behind.
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. But when growth rates for 2013 are chalked up, these are the countries that will dominate the top 20.
The changing face of the global economy is reflected in the rapidly expanding scale of the summits designed to sort out its problems. Not so long ago, when 80% of global GDP was accounted for by Europe, North America and Japan, it was the G7 that was the forum that counted.
By the middle of the 2000s it became impossible to discuss the future of the world economy without the presence of China and India, and when a second great depression loomed in late 2008 the G20 was formed. This included not just the G8 and the Brics but a sprinkling of the more strategically important emerging economies, such as Indonesia, Turkey, South Korea, Mexico, Argentina and South Africa. Recent developments suggest that more seats may be needed at the conference table before too long.
While some emerging countries, such as Vietnam, have been hard hit by falling western demand for their exports since the financial crisis of 2007-08, others have been sustaining strong growth rates. Bangladesh and the Philippines have been helped by remittances sent home from expatriates working overseas. Nigeria has been a beneficiary of the global commodity boom that has seen the cost of a barrel of Brent crude oil remain above $100 a barrel. Mexico and Indonesia have generated strong domestic demand from their large populations.
John Hawksworth, chief economist at PricewaterhouseCoopers (PwC), said: "There are countries beyond the Brics that have quite strong long-term growth potential."
FORECASTS
Back in 2006, PwC made some long-term forecasts about what the global economy might look like in 2050, and it has now updated the predictions in the light of the financial crisis and its aftermath. By 2050, Hawksworth expects Turkey's economy to be bigger than Italy's, and one of the largest in Europe. Indonesia and Mexico will have outstripped Germany and the UK.
Economists such as Hawksworth say there are a number of key factors that are allowing emerging countries to grow more quickly than the mature markets of the west. Firstly, they need sound macro-economic policies, including control of inflation and budget deficits. Secondly, they have invested in human capital, improving their educational standards. Thirdly, they have been able to import new technologies from the west, with the spread of mobile telephony in Africa an example of the way in which a lack of physical infrastructure can be bypassed to boost productivity quickly. Finally, they tend to have young and growing populations.
O'Neill, when he identified his "Next 11" group as the successors to the Brics, chose many of the most populous countries in the world for his list: Bangladesh, Egypt, Indonesia, Iran, South Korea, Mexico, Nigeria, Pakistan, the Philippines, Turkey and Vietnam.
"Some of these emerging countries have good demographics, based on a growing and younger population than countries in the west," Hawksworth said.
"They have a lot of potential for catch-up as long as they have broadly growth-friendly policies – a big if in some cases. They have the potential to absorb technology from overseas and can get rapid growth. It doesn't mean all will achieve it but a fair few will." He drew a comparison between South and North Korea, saying one of the world's last bastions of communism was an example of what happened to countries that cut themselves off.
HSBC has cut its growth forecast for 2013 because of the impact of collapsing world trade on those emerging markets that have based their development on export growth. But in the longer term, there is optimism even for what has up until now been the world's slowest-growing continent: Africa.
Charles Robertson, chief economist at Renaissance Capital, an investment bank for emerging markets, said he expected a sevenfold increase in Nigeria's GDP per head over the next four decades. "Africa today is a top 10 global economy, with $2tn of GDP – similar to Russia. By 2050, if it continues the trajectory it has been on for the past 30 years … it will be $29tn [£18tn] and bigger than the US and eurozone combined today."
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