Where are the pockets of opportunity?

Transcript

Many emerging economies are losing growth momentum, making the outlook for businesses more challenging. So in this month’s edition of the Global Economy Watch, we’ve look for pockets of opportunities that exist in the global economy which could provide businesses with a buffer against a slowdown.

Using our ‘Conditions for Growth’ framework, we’ve identified 4 countries out of the 25 we monitor – Poland, Australia, South Korea and Canada- that are well placed to prosper in the coming year.

These economies offer businesses with:

  • a good local blend of inputs like people and capital;
  • easy access to growing markets which help fuel future business growth; and
  • a stable institutional environment that fosters entrepreneurship and encourages competition.

We think for example that the Polish economy will grow significantly in the next five years because it has unimpeded access to the large and wealthy European economies and its dynamic exports sector - which now makes up 46% of its GDP.

Australia has the most stable business environment out of the economies we monitor. We believe this fact, coupled with its geographic location to a fast-growing part of the world and stable demand for its natural resources, will mean businesses will continue to consider it as a safe investment hub in the Asiapac region.

South Korea is our third pocket of opportunity, and has a key edge as they spend almost 4% of their GDP into research and development.

And finally Canada which has low carbon intensity. For businesses, this means they are less sensitive to energy price swings.

At a glance

Many emerging economies are losing momentum, challenging the growth plans of international businesses. Using our ‘Conditions for Growth’ framework we’ve identified 4 economies which could provide businesses with a buffer against a slowdown.

These are economies which have:

  • a good local blend of inputs like people and capital;
  • easy access to growingmarkets which help fuel future business growth; and
  • a stable institutional environment that helps entrepreneurship and encourages competition.

So what are the pockets of opportunities in the global economy and why do we think they have the edge in the areas thatmater?

We think Poland is increasingly benefitting from easy and open access to internationalmarkets like the European Union (EU) and Russia. Exports accounted for around 46% of Polish GDP in 2012, almost double the 27% share in 2001.

Australia has the most stable business environment out of all the economies we monitor.We believe this fact, coupled with its geographic location near to a fast growing part of the world and continued demand for natural resources, will mean that businesses consider it as a relatively safe investment hub in the Asia- Pac region .

South Korea’s high levels of research and development expenditure (3.7% of GDP) and a skilled workforce is providing the resources necessary for growth in the technology sector.

Canada is energy secure and uses one of the highest shares of renewable energy in electricity generation of any economy we track. For businesses, this means they are less sensitive to energy price swings in the future.

Continuing our focus on growth areas, we also discuss the economic prospects of the Central and Eastern European economies (CEE) with an interview with our senior economist in Poland.

However, in some emerging economies, the mood is turning sour. Our expectations of 2013 GDP growth in emerging economies are, on average, around 0.7 percentage points lower than 6 months ago. This is driven by long-term structural weaknesses and large current account deficits, which have become an increasing focus of market concern as the prospect of future tapering by the Federal Reserve draws capital back to advanced economies.

Chart of the month

Figure 1: Our refreshed pockets of opportunity: Canada, Poland, Australia and South Korea

Fig 1: Our refreshed pockets of opportunity: Canada, Poland, Australia and South Korea