Tuesday, 10 June 2014

The Outlook For Emerging Markets in The Global Economy

Emerging markets continue to provide investors with stability by consistently performing well in the global economy and remain to have a positive outlook.

emerging markets economic outlook 2014
For several years now, since the financial crisis of 2008-2009, a large portion of investor interest remains in emerging economies, especially the Middle East and the BRICS countries, which include: Brazil, Russia, India, China and South Africa. An emerging market or economy can be defined as:
A sovereign economy that is experiencing faster growth than more developed economies, characterized by rapid industrialization and, very often, social changes at the same time.

As a result of this rapid economic growth, investments in these markets are very appealing to investors, especially given that they tend to have much higher growth rates when compared to growth in the developed countries. Despite this positive track record, recent commentary on emerging markets has turned (somewhat) negative, which reflects a combination of economic uncertainty, continued slow growth in advanced economies and possible overvaluations resulting from previous forecasts and expectations. Nevertheless, it is important to stray away from this pessimistic view point, as emerging markets continue to represent good investment opportunities and a large chunk of investor interest.

A shining example of a prospering emerging market is Asia's largest and most influential super-economy, China. China's economic performance, one way or another, will affect the rest of the global economy. The aggressive and comprehensive reform programme announced in November 2013 and detailed in December (2013) is intended to significantly modify the Chinese growth model and sustain future growth in the above 7 percent range. Albeit the risk associated with this aggressive economic reform may make markets nervous, it does not imply a major defect in the plan. In fact, it is the opposite. It is a commitment to use whatever policy levers are available to sustain economic growth above a certain percentage.

Collectively, emerging economies are not burdened with too much debt either. The majority of them have resources and increasing policy expertise required to sustain and even increase economic growth. Although they do not have the same growth as advanced countries, which still account for half of the global economy, the growing Chinese market is a partial counterweight and the still-partially recovering United States is contributing to their overall growth. With that being said, the outlook for emerging economies varies.

An emerging economy such as Brazil - which is continuing to evolve as per capita income increases, is expected to become a leading consumer of products not only produced in Brazil but also those imported from regional and global markets. Also of notable interest, Brazil will be hosting the World Cup in 2014 and the Olympics in 2016 and thus have already seen and expect to continue to see significant investment in infrastructure, which should help drive economic growth in the coming years. Meanwhile, other emerging economies may not achieve the same economic growth as Brazil, but the outlook for the global economy does look positive, thus resulting in positivity for all economies.

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