Skip to main content

Growing places

Global economic growth is happening – you just have to know where to find it.

Out of the rubble of recent economic history, the prospect of a changed global economic order has become a major talking point.

Post-2007, as the US, the euro zone and other developed nations floundered with anaemic (at times, negative) growth rates, the economic pulse of many of that we call the 'emerging economies' ticked away happily.

China, which overtook Japan in 2010 and assumed the mantle of world's second largest economy1, led the way. While the rest of world busied itself trying to reduce debt, China became the locomotive of global growth, ably supported by a group of other economies that are on the rise and are outside what we like to call the 'developed world'.

It's a pattern that's set to continue: most of the world's forecast growth this year will come from emerging markets.2 Looking longer term, the OECD recently projected that by 2060, China and the rest of the developing world will have surpassed today's developed world in terms of economic output.3
China is the emerging economy we hear most about in New Zealand. This is not surprising given China's global prominence, our proximity to East Asia and our trade links with the 'Middle Kingdom'. But who are China's fellow travellers on this new Great March?

Building with BRICS

A number of years ago, the acronym BRIC was coined in reference to a cluster of emerging economic powerhouses around the world – Brazil, Russia, India and China. The acronym caught on, and the countries themselves decided to create a formal association, holding their first BRIC summit in 2009. In 2011, South Africa was added to make it 'BRICS'.

They are a disparate group politically, but according to Financial Times commentator Martin Wolf, they share a belief that "the existing dominating powers should cede some of their influence and power." 4

During the early years of the global financial crisis, elements of the BRICS economic advance looked formidable. In 2010, for example, China achieved a growth rate of 10.4%, India's was 10.1% and Brazil's was 7.5%.5

However, what has become clear recently is that not all BRICS economies are created equal.

Without the commodity boom, Brazil has fallen off the pace, according to the International Monetary Fund.6 Russia will always have relevance as an oil and gas supplier, but there hasn't been much invested in other parts of the Russian economy, which limits its growth potential. And though significant in Africa, South Africa's economy is relatively small in world terms.

Besides China, this leaves India. And there is no doubt that India is a growth engine of the future.

India's economy is 40% larger than Germany's and is already ranked as the third largest in the world.7 By 2060, the OECD forecasts that 18.2% of the entire world's economic output will flow from India.8 Recently, there have been inflation problems and government overspending, but for all that, the Indian economy is projected to expand 4.9% this year.9 Any developed nation would accept such a figure gladly.

Despite the more subdued outlook, there is no shortage of companies or investors making confident calls on India's long-term prospects. This is especially so in sectors driven by domestic demand. The bulging young population of the world's largest democracy has begun to develop an appetite for western-style consumption.

CIVETS Pride

In the wake of BRICS, another wave of emerging economies (and another acronym) has started to steal headlines. These are the CIVETS countries – Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa. (South Africa somehow sneaks into both groups).

A civet is actually a small nocturnal mammal, hardly emblematic of this dynamic group. The CIVETS nations share a number of key qualities, perhaps the most important of them being populations that are not only large, but also young. Take Indonesia. That necklace of islands north of Australia has an estimated population of 246 million with a median age of 28.2.10 Compare that to the US and the UK, which have median ages of 37 and 40 respectively.11 The Indonesian economy is mostly industrial and is supported by a government ambitious for the country to emerge as a manufacturing hub.12
Another feature common to many of these economies is their diversity. None of them leans too heavily on one sector, Colombia being a good example. The Latin American nation is the third largest exporter of oil to the United States, but also counts the following as its other main industries: textiles, food processing, clothing, footwear, beverages, chemicals, cement, gold, coal and emeralds.13

When it comes to economic growth, the CIVETS group has already shown its mettle, as borne out by these growth rates over 2011: Indonesia 6.4%, Vietnam 5.8% and Colombia 5.7%.14 And that's not all... the bullish trend is set to continue for quite some time, according to The Economist. The magazine has predicted the CIVETS nations will on average grow around 4.9% per year over the next 20 years. By contrast, The Economist expects the G7 countries (France, Germany, Italy, Japan, United Kingdom, the United States and Canada) to have yearly growth rates of just 1.8%.15

Of course, these are only predictions and there are still many variables and questions swirling around. Once the emphasis comes off debt reduction, will the developed world rebound strongly? Will structural challenges slow the development of these emerging economies? About the only thing we can be sure of is that tomorrow's global economy will not look like the one we know today.


  1. http://www.worldbank.org/en/country/china/overview
  2. http://www.nytimes.com/2012/11/06/world/americas/g-20-leaders-urge-balance-for-growth.html?_r=0
  3. Organisation for Economic Co-operation and Development (OECD)
  4. http://www.cfr.org/diplomacy/does-brics-group-matter/p27802
  5. http://www.heraldextra.com/news/opinion/editorial/around-the-nation/samuelson-the-bric-rescue-that-wasn-t/article_66fb0b5d-c772-5225-b718-137d30944da0.html
  6. ibid
  7. http://www.businessspectator.com.au/bs.nsf/Article/india-inflation-interest-rates-exports-economy-pd20121031-ZKS6C?OpenDocument&src=sph
  8. Organisation for Economic Co-operation and Development (OECD)
  9. http://www.heraldextra.com/news/opinion/editorial/around-the-nation/samuelson-the-bric-rescue-that-wasn-t/article_66fb0b5d-c772-5225-b718-137d30944da0.html
  10. http://www.guardian.co.uk/business/2011/nov/20/civets-guide
  11. http://searchenginewatch.com/article/2174005/CIVETS-New-Global-Marketing-Opportunities-in-Emerging-Economies
  12. http://www.guardian.co.uk/business/2011/nov/20/civets-guide
  13. ibid
  14. http://searchenginewatch.com/article/2174005/CIVETS-New-Global-Marketing-Opportunities-in-Emerging-Economies
  15. ibid
  • Last updated on .