Promising growth indicators for emerging markets

Promising growth indicators for emerging markets

The Covid-19 crisis has left many severe economic crises worldwide, but developing countries have real opportunities to rise in the coming period.

In an article in the US New York Times, the economist Ruchir Sharma believes that despite the decline of manufacturing and exports on a global scale during the past period because of the Corona pandemic, the transformations caused by the epidemic, such as the acceleration of the digital revolution, the adoption of economic reform programs and the rise of commodity prices, are the main causes of the recession. Provides favorable conditions for the recovery of a number of emerging economies.

Promising indicators
The 21st century witnessed remarkable economic growth for emerging markets, whose share in the world economy doubled to about 35%, and by 2007, 107 – out of 110 developing economies – were caught in the United States in average income according to the Human capital Index of the California and Groningen University. This has helped millions out of poverty.

The 2008 crisis has depressed developing economies and their share of the global economy, half of which fell in average income compared to the US by the same index.

Such retreat is considered normal – as the writer says – and does not cause worry, because the developing countries can achieve good growth rates for one or two decades, then it returns to the starting point because of the international economic crises. He sees promising signs that these countries can make a lot of gains out of the current crisis.

The digital revolution
The Corona crisis has led to increased reliance on digital technology, which can benefit developing economies sustainably, as these countries seem less connected to “old infrastructure” and rely more rapidly on wireless technology than developed countries.

Despite the problems of old government-run industries, a country like China is growing faster than the US, and it has maintained average income thanks to accelerated reliance on the non-monetary economy. The writer is likely that the digital revolution will play a major role in driving emerging economies’ growth in the coming period.

Economic reforms
The United States and a number of other developed countries have worked to address the Coronavirus crisis by increasing government spending, which may negatively affect future growth rates.

The developing countries – which do not have great abilities to spend to support the economy – depended on some measures and reforms that are expected to boost productivity and raise growth rates, although they do not enjoy a popular support.

As part of this approach, India has enacted new laws aimed at encouraging investment in agriculture, reducing taxes and dismantling its administrative red tape system to stimulate investment and create more jobs, and Brazil is moving forward with plans to reduce state-overburdened pensions. Saudi Arabia is reforming immigration laws to open competition in the labor market.

Export industries
Total dependence on commodity exports, such as oil, minerals, and agricultural products, precludes significant growth rates in a number of emerging countries and per capita income non-attainment of developed-country levels.

But, in periods of rising commodity prices, which is expected over the next decade, it will accumulate wealth in emerging markets such as Brazil, Russia, and Saudi Arabia.

Other developing countries have also been able to invest successfully in manufacturing industries, including Poland, which is home to multinational companies specializing in automotive, electrical and other goods. A similar shift is taking place in Vietnam, which is investing in a number of new industries and is implementing poverty-eradication programs.

If only a few countries are profitable from export industries, many other developing countries have an opportunity to thrive through economic reform programs, a potential recovery in commodity prices, or a reliance on a rapid digital revolution.

 

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