Rapid-Growth Markets Forecast: April 2012

Emerging market economies are still offering good opportunities for companies and investors across a wide range of sectors, although by no means all regions are now enjoying equally solid growth prospects.

Our latest rapid-growth markets forecast reports, nevertheless, that rapid-growth markets are proving resilient in the face of the debilitating impacts of the Eurozone crisis and Middle East tensions.

Overall, we see three main trends emerging in rapid-growth markets:

  • An overall resilience of rapid-growth markets (RGMs) thanks to robust consumption
  • A growing middle class that, in the medium term, will be a source of global growth and trade flows
  • A strengthening divergence among the rapid-growth markets

Our latest forecast expects a significant fall in rapid-growth market growth from 6.3% in 2011 to 5.3% this year. China and Hong Kong are expected to come in at 8.2% and India at 6.1%. A moderate recovery is in prospect for 2013 with growth at 6.3% – 0.4 percentage points below that forecast in January.

Nevertheless, rapid-growth market economies are robust and business confidence is on the rise as labor market growth, rising consumption and expanding trade flows emerge as key drivers of their growth. However, looked at nationally and regionally, significant growth differences are opening up this year between the 3.5% foreseen for the Americas, 4.2% for emerging Europe and the Middle East and 7% for Asia.

These numbers are less lustrous than those of 2010 or even last year, but they look much better than the -0.5% contraction to be followed by an anemic 1% growth in 2013 forecast in the spring edition of the our Eurozone Forecast.

Inevitably, the Eurozone sovereign debt crisis bears an important responsibility for the softening in rapid-growth market growth prospects. Its most immediate impact is being felt in emerging Europe, where the region’s banking is largely owned by major Western European banks that have tightened up on lending to protect and strengthen their capital bases.

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