Rapid Growth Markets to Dominate World Growth for Next Three Years

by CFO Innovation Asia Staff, 03 February 2012

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Budgeting and Planning Management

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economic activity Ernst & Young GDP growth rapid growth markets

Rapid growth markets (RGMs) are expected to grow collectively by 5.3% this year, in contrast to the mild recession expected in the Eurozone in H1 2012 and modest growth in the US, according to Ernst & Young’s quarterly Rapid-Growth Markets Forecast.

While RGMs are expected to remain a major destination for investors, in the near term, they are showing the strains from the falloff in demand from the Eurozone, as well as the buffeting to financial markets and business confidence over the past few months. As a result, growth in 2012 is expected to be lower than forecast by Ernst & Young’s October 2011 report. However, these markets are expected to continue contributing nearly half of the world’s growth over the next three years.

“Any escalation of the Eurozone debt crisis would have serious short-term consequences for the rapid-growth economies,” says Rain Newton-Smith, Senior Economic Adviser to Ernst & Young’s Rapid Growth Markets Forecast. “But RGMs are much more resilient than in previous decades. Government debt is low across most of these economies, and improved macro management means these economies are in a much better position to use well-targeted government spending or monetary policy to offset weaker growth.”

“The RGMs will continue to contribute nearly half of the world’s growth over the next few years,” comments Gerard Dalbosco, Managing Partner, Markets, Asia Pacific at Ernst & Young. “Emerging Asia with its rising middle class will lead the way, while strong commodity prices will underpin prospects in Africa and the Middle East.”

FDI inflows major contributor to growth

FDI inflows have been an important driver of growth in RGM countries over the past few years. With RGMs set to grow much faster than the developed world in the coming years, rising economic and trade links within RGM countries will see a continued flow of FDI from Asia and Latin America to Africa and other RGMs, improving infrastructure and technology across these markets.

However, the BRIC economies remain some of the most important destinations, with FDI inflows to China and Brazil, in the first six months of 2011, at US$111b and US$32b respectively also proving that FDI inflows have held up remarkably well despite turmoil in financial markets.

China and India are seeking to lock-up steady supplies of key commodities through major investments in RGMs in land and infrastructure. China is also putting money into oil and mineral production. FDI is flowing into Africa from other sources, including Brazil and Malaysia. The ease of doing business is being facilitated in many countries by the growth of telecoms and IT sectors.

“With prospects in the advanced economies weakening, particularly in the euro area,” says Dalbosco, “RGMs will need to look for opportunities within their own economies to drive growth, including fostering entrepreneurship.”

According to the survey, which covered over 1,000 entrepreneurs in G20 countries, 61% of respondents in RGMs perceive that simplifying start-up regulations would have a high impact on entrepreneurs’ long-term growth prospects.

Finance Industry is growing

Submitted by Aditi ketkar on 8 February 2012 - 2:24pm

Finance Industry is growing very rapidly so market is getting updated day by day. Finance outsourcing is most important thing for finance Industry. This is really interesting to read above article. This is major thing for many investors. They expects high return in oil and minerals investment.
http://www.guidetoinvest.net/articles/how-to-invest

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