SOME EMERGING ECONOMIES TO WATCH THIS YEAR – THE “V.I.P.s”
Why Vietnam, India, and the Philippines Should Be On The Radar
2016 had been an interesting year for world markets. With Brexit looming in the UK, President-elect Trump’s surprise win in the USA, the Italian constitutional referendum, the South Korean presidential scandal – the list goes on just from developed economies alone. As far as emerging markets, many once former rising stars, notably the BRICS (Brazil, Russia, India, China, and South Africa) have started to slow down, or even contracted, in terms of economic growth. Commodity prices haven’t helped either, for instance with oil, which in recent memory has been trading at very low prices, affecting economies such as countries in the Middle East, Latin American countries like Mexico and Venezuela, and parts of Africa such as Nigeria.
Many investors and businesses are uncertain about where to invest or to expand trading relations with, given the uncertainties in what were considered once almost certain potential international business opportunities. With the sudden change in fortunes for many countries, as well as uncertainty in economic outlook for other markets, which ones would be the ones to look out for this year? With regards to emerging markets, there are quite a few markets to watch; some of those are the following V.I.P.s of the new year:
Vietnam, a country of nearly 90 million people located in South East Asia, is experiencing an economic boom. Its economy from 2010 to last year grew between 6.7 – 9.8 percent. Once closed to the world, the country has opened to trade and investment, which has attracted people and multinational enterprises from all over, due to a growing consumer market and cheaper labor costs. In fact, neighboring China has taken note, which has been a major contributor of foreign direct investment (FDI). One factor is that labor costs in China are now much more expensive and that Vietnam offers a competitive and cheaper alternative. These not only include Chinese companies looking for inexpensive alternatives but other multinational enterprises who once might have considered only China.
According to the World Bank, with reforms that have been placed in its economy nearly 25 years ago, Vietnam is now a low middle class economy. With its large population and continuous growth, the country is definitely worth noting. The future also looks bright for Vietnam, as the socioeconomic plan from 2016 to 2020 shows very ambitious targets, including the country aiming to be an industrialized country by 2020, having a GDP per capita of at least $3,200 (in 2015 that was just over $2,000), and having average economic growth in this period in the range from 6.5 -7 percent.
India, unlike many of its counterparts in the BRICS, is still doing relatively well. Given its population of almost 1.3 billion people alone (more than 1/6 of the world), that in itself gets much attention to this emerging economic powerhouse. With around 22% now in the middle class, there is potential for the majority of less advantaged Indians to move up the socio-economic ladder. With a recent UN report, India’s economy is expected to grow this year to around 7.3%, which is a much stronger figure than its other BRICS counterparts, which they have either slowed down or contracted in terms of economic growth.
The country has definitely brought itself to the world stage, with high profile visits to the country by outgoing President Obama, Prince William and Princess Kate, and recently with UK Prime Minister Theresa May. In addition, Indian Prime Minister Narendra Modi’s visits abroad have also brought much attention to this increasingly economic powerhouse. With some recent events, for instance with the recent 500 and 1,000 Indian Rupee crisis, much remains to be see what will happen to India this year. However, given the enormous size of the country, coupled with its high economic growth levels, the country is definitely a rising powerhouse.
Despite the negative views of economic growth for the country in the past, it has become a star darling amongst its neighbors in Southeast Asia and the Pacific. The country has produced consistent growth over 5 % the past few years. Through time, the country has developed major clusters of certain industries. One of those is the call center industry, as just like with India, the country not only offers lower wages but an educated English-speaking population to cater to multinationals looking for cheaper and high-quality investments from countries like the USA, Canada, UK and Australia.
The country of over 100 million people in the past, especially much of its highly educated citizens, usually left the Philippines for jobs overseas in the USA, Canada, Europe, Australia or the Middle East. In fact, like in many places, one of the Philippine’s largest exports has been its people. Estimates range but there are over 10 million Filipinos who live and work abroad. But now many are tempted to stay and return to a country that is quickly growing and bringing opportunities previous generations did not benefit from. The remarkable growth of the Philippines will be one to take note, especially if President Rodrigo Duterte, who has caused some attention globally with his bold and often regarded as controversial statements, can maintain and transform the country from a middle to upper middle income economy.
With the recent uncertainties in many developed economies, it is natural to search for new opportunities in emerging economies. With the slowdown in many countries like China, economic downtown in places like Russia and Brazil, some of this year’s V.I.P. markets to watch – Vietnam, India, and the Philippines, will no doubt play increasingly major roles in the global stage. They have shown tremendous economic growth and each one represents large populations with growing middle classes and consumer demand. They will definitely be some countries to watch out for this year.
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