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The five major emerging economies, BRICS – Brazil, Russia, India China and South America – are starting to slow down after 10 years of accelerated growth.
According to a new study by Coface, the growth on average for these countries in 2014 is 3.2 point lower than what is registered over the previous decade.
This is in part due to a slow down in investment in these countries, where many businesses no longer have the capacity to sustain the demand for growth, the report said.
At the same time, emerging countries are accelerating their development, showing themselves to have good production prospect and strong financials to support growth and expansion.
Coface identified the following high prospect countries based on several criteria, including:
- Having high growth which is accelerating, and an economy that is diversified and resilient to growth slowdowns, and
- Sufficient funding capacity to finance growth (a minimum level of savings needed to avoid excessive recourse to foreign savings), without the risk of creating a credit bubble or which do not yet have equity markets of a comparable size of those in OECD countries.
The 10 new countries identified are, however, not the same in terms of their business environments, meaning Coface distinguished two groupd of new emerging economies:
Strong countries – Colombia, Indonesia, Peru, the Philippines and Sri Lanka.
More difficult countries – Kenya, Tanzania, Zambia, Bangladesh and Ethiopia.
The stronger countries have a sound business climate similar to that of today’s BRIC countries, while the more difficult countries have potential, but have harsher business climates which could hamper development.
“Naturally, it will be more difficult for the second group of countries, who could take longer to fully realise their growth potential,” said Julien Marcilly, head of country risk at Coface.
“However, their business environment problems are relative: in 2001, the quality of governance in Brazil, China, India and Russia was comparable to that of Kenya, Tanzania, Zambia, Bangladesh and Ethiopia today.”
The report also stated the growth of these countries will take a different path from BRICS, given that while BRICS accounted for 43% of the population in 2001, these new emerging countries only represent 11% of the world’s population.
Additionally, their GDP level is only 70% of that of the BRICS in 2001, however inflation rates in the new emerging countries are around 2.8 points lower than those the BRIC countries experienced, and their level of public debt is around 40% of GDP compared to 54% for the BRICS at the time.