Emerging markets: leading the way to recovery.
Emerging markets: leading the way to recovery.
The importance of the emerging markets to the world economy has been brought into sharper focus as the world emerges from recession. Not only have these economies been less severely hit, but they are also recovering more quickly, with growth rates over the next two years forecast to be well over double that of more mature economies.
As the demand for overseas investment in the emerging markets increases, the opportunities for businesses to get ahead, or to be left behind, only increase. The Grant Thornton emerging markets opportunity index ranks the level of opportunity for investors in 27 emerging economies across the globe. Taking account of key factors such as size, wealth, involvement in world trade, growth potential and levels of human development, it highlights these markets as investment prospects with their large, rapidly expanding and increasingly affluent economies.
The top five economies this year remain the same as in the 2008 emerging markets opportunity index. China leads the way thanks to its huge consumer market, increasingly open economy and staggering trade growth, followed by the other developing Asian powerhouse, India. Russia, thanks to its wealth of natural resources, is third, followed by the two largest economies in Latin America, Mexico and Brazil. Turkey, Egypt, Peru, Colombia, Argentina and Chile are the emerging markets moving up the most, indicating that Latin American economies are offering increased investment opportunies to businesses worldwide.
The International Business Report (IBR) 2010 results offer some relevant insights into the health of the business populations in the emerging markets. Optimism levels amongst businesses in emerging economies have been around 60 percentage points higher than those of their counterparts in more mature economies since 2007. This year, a balance of +57 per cent of emerging economy businesses are optimistic about the year ahead for their country’s economy, compared with just +2 per cent of their peers in more mature economies. However, the survey reports that the growth prospects of businesses in emerging economies are being hampered by poor access to finance and a lack of highly-skilled workers to a much larger extent than their counterparts in more mature economies.
This optimism that is permeating the emerging markets, despite the finance and labour constraints businesses find themselves under, highlights the potential in these markets for investment. The opportunity for investors to feed off this optimism and help emerging economy businesses overcome the barriers they face as regards expansion are enormous. Indeed, these markets and their businesses are developing so rapidly and powerfully that not exploiting them represents a huge risk to long-term profitability.