More than a decade after Brazil, Russia, India, China and South Africa – collectively dubbed the ‘the BRICS’ – were identified as the world’s most dynamic emerging economies, a report by Coface has identified 10 emerging countries it deems as most likely to form the new wave.
In a report entitled
‘Coface identifies 10 emerging countries hot on the heels of the BRICS’
, the French trade credit and insurance group states that ‘after 10 years of frentic growth’ the five BRICS economies ‘are slowing down sharply’.
The report predicts that average economic growth by the BRICS this year will be 3.2 percentage points less than the average for the past 10 years. Coface expects Indonesia, Bangladesh and Ethiopia to be among the 10 countries poised to take over as the pacesetters for economic growth.
Coface separates the 10 new emerging economies it has identified into two separate groups. The first is made up of Peru, the Philippines, Indonesia, Colombia and Sri Lanka, which it dubs the PPICS. The five have “strong potential confirmed by a sound business environment,” according to the report.
The second group comprises Kenya, Tanzania, Zambia, Bangladesh and Ethiopia. These five countries are distinguished by “very difficult or extremely difficult business environments which could hamper their growth prospects”.
However, Coface’s head of country risk, Julien Marcilly, commented that back in 2001 “the quality of governance in [the BRICS] was comparable to that of Kenya, Tanzania, Zambia, Bangladesh and Ethiopia today.”
One major difference is that the BRICS accounted for 43% of the world’s population in 2001, whereas the 10 new emerging countries identified by Coface account for no more than 11%. Another is that total gross domestic product (GDP) of the new 10 collectively amounts to 70% of the output of the BRICS in 2001, and they currently have a current account deficit of about 6.0% of GDP whereas the BRICS ran a surplus on average.
On a positive note, the new 10 have inflation rates around 2.8 percentage points lower than BRIC inflation in 2001, while their public debt is about 40% of output compared with 54% for the BRICS at that time.
A New Phase
Coface said that slowing growth in the BRICS can be traced to an adjustment in supply and ‘a marked slow-down in investment’, despite favourable trends for consumption as local businesses increasingly fail to satisfy strong demand.
Marcilly added that the five economies were moving into a new phase, as their exports were becoming less competitive while they were not yet competitive in offering products with very high added value.
This trend had encouraged Coface to identify the next wave of driving emerging markets, distinguished by potential annual growth of at least 4.0%, a diversified economy without undue dependence on the sale of raw materials, and some capacity to absorb economic shocks. These favourable conditions should be matched by a financial system capable of supporting investment, but without raising risks of overheating.
Coface’s chief economist, Yves Zlotowski, said that the insurer had tried to combine measures of growth potential and risk potential. This method made Vietnam ineligible to join the list of powerful new emerging economies, as despite strong economic potential its financial system was out of control.
The group’s acronym of PPICS as a collective term for five new emerging economies join others devised in recent years, such as MINT (Mexico, Indonesia, Nigeria and Turkey) and CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa).
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