13 March 2014
By Michael Schuman
While many emerging markets are taking a beating, a fantastic growth story in the developing world is widening and drawing in new countries.
Emerging markets are taking a beating these days, most of all the famous BRIC economies — Brazil, Russia, India and China. These four once seemed poised to dominate a post-American world. Not anymore. Brazil and India are posting growth rates that are only a fraction of what they were a couple of years ago. Russia’s prospects, already hampered by an overbearing state, are unlikely to improve as its aggressive moves into Ukraine could force Europe and the U.S. to impose economic sanctions. Even mighty China, while still notching admirable growth, must confront rising debt and a distorted financial system. The supremacy of the emerging world suddenly seems very far off.
But look past these headline grabbers, and you’ll find other emerging economies continuing to show economic strength. So for now, forget the BRICs; take a look at the PINEs. The PINE economies are the Philippines, Indonesia, Nigeria and Ethiopia. I have to confess I made up this acronym, and I fear it isn’t quite as catchy as BRIC. But I’m trying to make a point here. What the PINEs represent is something very important for the future of the global economy and quest to alleviate poverty. The PINEs are all performing very well right now, and that shows that the advance of emerging economies is far from over. In fact, the fantastic growth story in the developing world is widening and deepening, drawing in countries and regions that had previously been left out.
Take, for instance, the Philippines. When most of East Asia emerged from colonial rule after World War II, the Philippines was considered one of the new countries with the greatest potential for development. Sadly, things didn’t turn out that way. As much of the rest of East Asia zoomed ahead on its economic miracle, the Philippines got left behind. Millions of Filipinos were forced to search for jobs around the world, creating a diaspora from Hong Kong to Dubai. Now, though, the Philippines has become one of the region’s best performers. Even after getting smashed by Typhoon Haiyan last year, GDP still surged by 7.2%, and the IMF expects the country to post similar rates over the next several years.
Indonesia has staged a comeback as well. Though the Southeast Asian giant had been a strong performer in the past (during the early 1990s, for instance), political upheaval and regional conflicts scared off investors, especially after its 1997 financial crisis. But now Indonesia has returned to the ranks of the world’s most desirable emerging economies, thanks to a stable democracy and a burgeoning consumer market. Foreign direct investment increased a hefty 17% last year. Though the stampede from emerging markets after the U.S. Federal Reserve signaled it would scale back its stimulus efforts pummeled the country’s currency, and growth dipped a bit last year, the economy is still forecast to growth at about 6% annually over the next several years.
The strong performances of Nigeria and Ethiopia are even more exciting. Africa generally stood on the sidelines while Asia and other parts of the developing world experienced giant gains in welfare over the past half-century, but now, finally, the continent seems to be joining the party. Nigeria is the largest country in sub-Saharan Africa and has long been seen as a potential economic heavyweight, and now that a more stable government is implementing some much needed reform, investors are flocking into the nation. Ethiopia may be even more exciting. Once synonymous with poverty, peace and strong economic management have turned the nation around. The International Monetary Fund sees growth in the 7% range in the coming years for both countries, and there’s even talk of a group of “lion economies” rising up in the same way the “tigers” of Asia did in the late 20th century.
There are, of course, risks that these countries will falter, if politics or corruption gets in the way. And though the advance of the PINEs may not have the same global impact as the BRICs — China and India are so big they’re in a class by themselves — the PINEs still represent a major opportunity for international companies to invest, expand and find new customers. The PINEs, after all, have a combined population of about 600 million people. So don’t be too quick to dismiss the emerging-markets story. The meek may yet inherit the world.