Largest Emerging Economies, E7+Pakistan, growth prospects and challenges

[Hello_10]

Emerging Markets Are Going To Spend A Massive $6 Trillion On Infrastructure In The Next Three Years

Merrill Lynch estimates that $6 trillion will need to be spent by selected emerging market countries over the next three years to meet the basic needs of these citizens. Water, transportation and energy investments will consume the bulk of these funds, accounting for 82 percent of total projected spending. Nearly every emerging market country Merrill researched will make an investment in all three.

While each developing country could benefit from an upgrade, needs vary. This table details how different emerging market countries stand up against each other in terms of quality for the country’s roads, rails, ports, etc. We’ve highlighted the specific areas where the countries rank in the bottom half among the 133 surveyed by the World Bank.

You can see that Brazil has the worst overall ranking among the countries listed. Though the country is a large exporter, the extremely poor condition of the country’s roads and rails has hampered the growth of internal textile and farming industries.

India’s infrastructure also rates poorly, and is slowing the country’s ascent to top of the world’s economies (Read: India’s Achilles Heel).

China, which accounts for more than half of that $6 trillion estimate, ranks far above emerging peers in terms of infrastructure at the 65th percentile. Merrill says that one of China’s biggest needs is in water and environmental development. The firm estimates that the Asian country will need to build roughly 40,000 reservoirs at Rmb 12.5 million a piece to create an internal water distribution system and alleviate pressure when regions experience extended droughts such as what China is seeing presently.

Emerging Markets Are Going To Spend A Massive $6 Trillion On Infrastructure In The Next Three Years - Business Insider

Brazil spending vast amounts on infrastructure
Aug 14, 2012 9:34 AM

Brazil estimates that it must spend $110 billion per year over the next five years to meet its infrastructure needs.

The figures are from the Brazilian Association of Infrastructure and Basic Industries (ABDIB) and reported by Canadian Manufacturing online.

In comparison, Canada spent $8 billion on new infrastructure in 2010-2011 at the height of the government's infrastructure investments. The figure has declined to $4 billion for 2012-13. click here

Brazil's construction requirements are heightened by the infrastructure needs of the coming 2014 FIFA World Cup of Soccer, for which several stadiums are under construction, and the 2016 Olympic Games in Rio de Janeiro.

By 2015, Brazil is expected to have invested CDN $22 billion in its rail infrastructure alone.

The country has the fifth largest population in the world. Its GDP in 2011 was $2.324 trillion. Canada's GDP is about $1.4 trillion

Brazil spending vast amounts on infrastructure | Canadian Consulting Engineer

 

[Hello_10]

can anyone here tell me, how the national Debt of US going down in this Debt clock as below? and from my side, i may say that if budget deficit of US is 9% of its GDP and it would grow by around 2% only then with 1% inflation, US's debt level would grow by 5% of its GDP every year this way (around $800bil every year due to budget deficit only, without considering Value Added effects). plus, adding any type of stimulus packages/ bail-outs also, like how US has decided to print $40bil every month to heat up its economy....

World Debt Clocks


like another Debt Clock, which shows about Debt of US only, is as below. which shows rise in US's debt by at least $1mil every minutes

U.S. National Debt Clock

 

[Hope Loust II]

I would like to start a thread to discuss the largest emerging economies.......

The International Futures (IFs) Institute has published projections for economies all over the World, using similar standardized methodologies to the ones that O'Neill used for this N-11 report.

Here are the projections for all South-Asian Countries PLUS the other developing countries in the N-11 (i.e. all minus Korea, which is already considered developed by the OECD). In other words, the following data cover South Asia (Pakistan, India, Bangladesh, Sri-Lanka, Bhutan, Maldives) and other "developing" N-11 candidates (Iran, Turkey, Indonesia, Vietnam, Philippines, Mexico, Nigeria & Egypt)---

The relative projection for Pakistan does not look very good. I think the IFs has a low estimation of Pakistan because: (i) it has an extremely low domestic savings-rate, (ii) it has no track-record of being able to boost the savings-rate and (iii) it is a heavily populated country with little chance of natural resources pulling us out of the low savings trap, because any per capita figure for resource extraction & sales would necessarily be low.

I see no choice but for Pakistan to immediately begin a Government Policy & Plan to boost domestic savings, even if it means some short-term pain in terms of loss of upfront consumptive sales growth.

In any case, I was extremely disappointed to see Pakistan straggling at the bottom of the graph shown above. So I searched for some countries who are projected to do even worse than Pakistan. I just wanted to plot Pakistan at the top of the list in terms of relative performance somewhere. This was not as easy as it sounds. But I managed to get it done. Here are the data that make Pakistan country look relatively good--

Even after all this, note that quite a few of the countries listed are actually catching up in terms of relative performance.

Clearly, Pakistan needs to work harder and get its act together if it is going to transform into a moderately-developed country any time in the next couple of generations.

 

[Hello_10]

India ranks 2nd in retail realty investment momentum index
Sep 12, 2012

NEW DELHI: India ranks second among top 20 countries with the strongest momentum in retail real estate index and it lags behind China due to weaker investment prospects and a smaller presence of global retailer, according to a report by global property consultant Jones Lang LaSalle.

"Our Retail Real Estate Momentum Index identifies 20 markets with the strongest retail real estate momentum. In top positions are China, India, Indonesia, Turkey, Brazil and Vietnam," JLL said in its report released today.

The index aims to identify those countries with the strongest momentum in terms of consumer, retailer, developer and investor activity.

China and India, unsurprisingly, top the Index, due to their favourable demographics, rapid urbanisation, strong consumption growth and significant expansion of modern retail infrastructures, it said.

However, the consultant observed that "India falls short of China due to weaker real estate investment momentum and a smaller international retailer presence".

On the future prospects, the report said "India will remain a two-paced market. From a retailer perspective, the country is clearly a key destination and although the retail market is yet to open fully to international retailers, when it does, major international retail groups will expand rapidly across India," JLL said.

Although, India has permitted 100 per cent FDI in single brand, it is yet to allow FDI in multi-brand retail.

The report said "...from a retail investment point of view, it is still unlikely that India will see a boom in foreign investment in the short to medium term."

Commenting on the report, JLL India Chairman Anuj Puri said: "The Indian retail sector is in a dynamic state of re-invention, with the initial hit-and-miss approach based on perceived absolutes rapidly giving way to superior malls, more business-conducive locations and better business models."

"We are able to track these positive market modifications by the way in which demand for retail real estate is changing in India. There is a clear thrust towards international benchmarks, with growing market knowledge and ever-increasing aspirations driving current and future growth," he added.

JLL report also projected that "annual investment volumes in retail real estate could hit $180 billion globally by 2020 due to increasing cross-border activity, showing growth of around 50 percent on the projected volumes for 2012 ($110-125 billion)".

The report confirms that in the last decade, more than $1 trillion of retail real estate has been traded around the world. Global direct investment has averaged more than $100 billion per year since 2004 and in 2011 annual volumes hit $122.5 billion.

India ranks 2nd in retail realty investment momentum index - Economic Times

 

[Hello_10]

Younger CEOs paid more in India than US

MUMBAI: A new breed of younger Indian CEOs is rewriting the rules of the compensation game. In the process, they are topping their American and European peers to stand out as the highest paid executives globally, something which was once the exclusive preserve of executives from companies based outside India.

The average annual salary for an Indian CEO below the age of 50 years now stands at Rs 7.9 crore. Compared with the Rs 7.3 crore that American corner office occupants earn and Rs 7.8 crore pocketed by European bosses, it highlights the rising salaries of younger CEOs, especially in promoter-run firms in India.
Younger Indian CEOs may have stolen a march over their global peers in the salary sweepstakes but overall, Indian CEO salaries are substantially lower than their international counterparts. This was revealed in a study by global recruitment firm Randstad, which was commissioned by TOI to compare the differentials that exist between salaries of Indian CEOs vis-a-vis their western counterparts.

The compensation of Indian CEOs, though growing sharply, is still 45% lower than their American peers and 21 % lower than European CEOs. However, the gap in salaries when compared to European CEOs is shrinking faster, especially in the manufacturing, energy and infrastructure segments, the study points out. Indian CEOs received an average salary of Rs 6.3 crore.

The study is based on conversion of international salaries to Indian rupees by applying a Purchasing Power Parity (PPP) conversion factor of 20.224. This basically means that the exchange rate is adjusted so that identical goods in two different countries have the same price when expressed in the same currency. As a representative sample, Randstad took into consideration companies that form the BSE100 (for India), FT100 (for Europe) and S&P100 (for US) indices as of August 20, 2012. All long-term benefits like stock options were excluded.

"With current levels of inflation, and if India's GDP shows higher growth, the gap between salaries in India will come closer to the levels of the western world. The younger Indian CEOs are compensated better, because there is a higher concentration of promoter CEOs in this group. We can see that in sectors like manufacturing, energy and infrastructure, first-generation promoters are passing on the CEO mantle to their heirs and other family members," says Balaji E, MD & CEO, Randstad India.
However, the trend of promoter CEOs earning more than professional CEOs is not restricted to the younger lot. Across India Inc, promoter CEOs earn 53% higher than professional CEOs, the study revealed.

While professional Indian CEOs still need to catch up with their international peers, the gap in the average salary is highest in the information technology, telecom and communications, finance, retail, media and entertainment sectors, closely followed by the consumer goods industry. In the manufacturing, energy and infrastructure segments, the compensation of Indian CEOs is at par with the European CEOs due to the higher concentration of promoter CEOs in these two segments.

"Today, more and more Indian CEOs get compensated at world-class levels. This trend is driven by several factors. Firstly, it speaks of the professionalization of management and secondly, the most critical constraint to growth is the availability of general managers. It is just pure supply and demand. Finally, professional managers have a considerable set of opportunities to choose from. The broad implication is that, going forward, India cannot become competitive by playing cost arbitrage but has to master the innovation game," says Vijay Govindarajan, professor at Tuck School of Business at Dartmouth College and a part of the celebrated Thinkers 50 group.

Some Indian executives, however, think that the differences in the way salaries are structured for Indian CEOs compared to their western counterparts would continue for a while. "There is a difference between CEO compensation in India as compared to the US and Europe. American CEOs, in particular, and businesses have much greater risks attached to them. The stress that leaders undergo makes them demand far greater compensations whereas in the Indian context, the time lines for performance and the risk factor is much lesser," says Hari T, chief people officer at IT services major Mahindra Satyam.

Indian CEOs from the manufacturing segment earned the highest at Rs 8.7 crore, followed by CEOs from consumer goods with an average salary of Rs 5.6 crore. The other significant point to have emerged from the study is that private sector CEOs are compensated 21 times more than public sector CEOs. With an average salary of Rs 6.3 crore, private sector CEOs are compensated far better than their public sector counterparts, who earn an average compensation of Rs 0.3 crore. The salaries of CEOs of the public sector do not include benefits and perquisites provided to those in the private sector.

Rajeev Chopra, CEO and MD, Philips Electronics India, is more pragmatic and refuses to buy into the euphoria over increasing salaries of Indian CEOs. "Broadly speaking, compensation has always been and will continue to be a function of a myriad factors, such as the prevailing salary structure in the country's job market, the specific industry, the business situation a particular company finds itself in, etc. Therefore, clearly, a 'one size fits all approach' has not worked and may not work in the context of global salaries."

Be that as it may, due to the increasing complexities of Indian businesses, salaries can only go up.

Besides, comparisons would never cease considering salaries remain the biggest point of discussion across management levels in global businesses.

Younger CEOs paid more in India than US - The Times of India

 

[Hello_10]

,
QS World University Rankings - Wikipedia, the free encyclopedia

here, this ranking is based on the level of infrastructure of Universities, not on the quality of students. for example, we have one more QS ranking of the Management Institutes as below, and compare average GMAT scores by Indian instutes with rest of the world.
Global 200 Top Business Schools 2010 by Region | TOPMBA (Asia)

(here, GMAT score for IIM Calcutta was '760' in 2009 which is incorrectly written here for 2010 as 500 only. Minimum GMAT score required for admission in IIM Calcutta is "700", as per in "Admissions Requirements" section of this website.)
Indian Institute of Management Calcutta | TOPMBA (IIMC)

and here, few US's institutes have average 700+ score due to international students only otherwise compare US with European shiits, only French ANSEAD could had on average above 700 GMAT score . while British Top Management institutes have more than 70% international students only. here we may see, how International Students of average 750+ marks have raised US's overall score to above 700 on average for its top management institutes, helping them performing high in business side by their performance, similarly how Indian professionals are back boon of US's technological firms

Global 200 Top Business Schools 2010 by Region | TOPMBA (North America)

Global 200 Top Business Schools 2010 by Region | TOPMBA (Europe)

Global 200 Top Business Schools 2010 by Region | TOPMBA (Latin and Central America)

 

[Hello_10]

The new ‘Hindu’ growth rate

The Indian economy has posted a 5.5 per cent annual growth during the first quarter of this fiscal, beating most analyst estimates that were closer to five per cent.

Business Line : Opinion / Editorial : The new

and have a look on this idiot, ask him, why Chinese Per Capita Income was less than that of India till 1991, till economic reforms in 1991, while CHina also adopted the same type of economic reform even in 70s? hence, does this mean that Chinese Culture is inferior to Hinduism? while 5.5% growth rate of India for the first quarter is mainly because of the extremly bad external demand this year, (even if Indian economy isn't dependent on export to the extent as China+ASEAN, defintely not)
India GDP per capita PPP
China GDP per capita PPP

and, even since the economic reform by "Rao Government" under finance ministry of MMS, Average Growth Rate of India was hardly around 5.6% for the next 11 years, from 1992 to 2002, excluding 1991, as below. then was it Sikh Growth Rate?
India GDP - real growth rate - Economy


and also, economic size of India was the highest till 18th, sharing the top 2 spots with China itself till 18th century, then was it because western Women like Sunny Leone were entertaining Hindus and Chinese till 18th century????
List of regions by past GDP (PPP) - Wikipedia, the free encyclopedia

and if India suffered "Brain Drain" even during last 65 years of independence, helping Western Economies maintain superiority during this period, then why was that? because Indian DNA was in demand in US/EU that time??? isn't it the 'culture' who helped Indians have this strength?

 

[Hello_10]

,
India needs light of Hinduism to get higher success like China

India needs light of 'Hinduism' to get higher success like China, which was helped by Chinese culture. there is a group of Indian Economists who find high growth rate of India could be achieved due to 'Vajpayee Government' who took those (+)ve steps in early 2000s which could accelerate the growth of India since 2002. for example, people talk about heavy investments in infrastructure while that mainly started since early 2000s. for example of 'Gram Road Yojna' started during the time of BJP government in late 90s and now we find so good roads to drive to villages also, even in Bihar state, my elder brother said who recently visited there.......

overall growth rate for the next 11 years since the economic reforms in 1991 didn't help Indian Economy to that extent, if it might not have got the changes in early 2000s, like how investments in infrastructure mainly started since early 2000s. growth rate of China was above 10% in between 1991 to 2002 while that of India was hardly around 5.6% for 11 years in between 1992-2002, excluding 1991??? while India also adopted the same type of economic reforms as China+ASEAN in 1991, under the "Rao Government"?????? India does need light of Hinduism to have higher success like China which was benefited by the Chinese culture, to get top two economic spots with China, similar to its state till 18th century.......

 

[Hello_10]

=> I just checked, at the end of financial year 2003-04, India registered the highest growth at '8.2%' "Under Vajpayee Government", since economic reform in 1991. it was the highest growth rate since reforms in 1991, and then BJP government completed its term by June 2004. and it was only 4% for the year 2002-03 as it was hit by the 3rd biggest drought of last one century...... so I would say that "Sikh Growth Rate", started by Mr M.Singh in 1991, had fianlly ended till the financial year 2002-03, with going on the path of very high growth rate since 2003-04, from 8.2%, due to the efforts by "Vajpayee Government" since late 90s/early 2000s, who started high investments in infrastructure during their period.

(while the financia years 1999-2000, 2000-01 were mainly hit by "Kargil War" and "Military Stand Off" after the attack on the Indian Parliament in 2001, due to the British Pet Dog Mr P.Musharraf. and even if 'Vajpayee Government' faced economic crisis of ASEAN in late 90s, together with Western economic sanctions after Nuclear Tests in 1998, it did have few high performance years 1998/ 1999/ 2000 even during that "Sikh Growth Rate" which continued till 2002. and then India came on the path of the highest growth at '8.2%' for the Financial year 2003-04, in the light of Hinduism and then India never look back. while China also adopted the same type of economic reforms since 1979, with having average over 10% growth during last 32 years since 1979, under the light of Chinese Culture?????)

India logs 8.2% GDP growth rate in 2003-04

India logs 8.2% GDP growth rate in 2003-04

=> The "Average Sikh Growth Rate" for 12 years of 1991 to 2002 was around "5.3%" only, for the 12 years since the economic reforms by Mr M.Singh in 1991, as below: (which also include few high performance years of 'Vajpayee Government' of late 90s, the 1998/1999/2000). while China registered over 10% growth for 32 years since 1979 when they also adopted the similar economic reforms as India, in the light of their Chinese Culture. (the China and India, which have been the two largest economies for centuries, till the 18th century.)

India GDP - real growth rate - Economy

 

[Hello_10]

BRICs Share Of World Economy Up Four Times In 10 Years
7/04/2012

The economies of Brazil, Russia, India and China account for 20 percent of the world economic output, and rising. That’s up four fold in the last decade, according to a report released yesterday by the International Monetary Fund.

Despite the growth, problems in the core economies had made the post-2008 world a difficult one for the big four emerging markets.

Their combined stock-market value has dropped to a three-year low of 16 percent of the total invested in global equities, according to data compiled by Bloomberg . Jim O’Neill , the chairman of Goldman Sachs Asset Management who came up with the term BRIC in a November 2001 research report, said that the pull back in equity values makes BRIC market stocks “irresistible,” Bloomberg reported him saying on Wednesday. The last time the gap was this wide, in 2005, the MSCI BRIC Index jumped 53 percent in 12 months, more than double the gain in the MSCI All-Country World Index.

“Unless we are seeing a major collapse of those economies, it’s a huge opportunity for investors,” O’Neill told the newswire.

Audrey Kaplan, a fund manager at Federated InterContinental (RIMAX) said on Monday in an interview with Forbes that she had started investing in China for the first time in nearly years in the first quarter and is now overweight China and Brazil within the BRICs.

“You want to own a lot of these big names when they’re cheap,” Kaplan said about Brazil’s large cap stocks which have underperformed the local BM&F Bovespa index all year. “We’re getting back into these names because they are very attractive at their recent price levels.”
According to Bloomberg, BRIC equity value, which includes locally-traded shares and ADRs, has dropped to $7.6 trillion from $9.5 trillion a year ago, when they made up 18 percent of the global total. Petrobras (PBR), Brazil’s state run energy company, fell to the world’s 39th-largest company by value from the 10th-biggest in July 2011. China Construction Bank’s rank dropped to 20 from 12 while Rosneft , Russia’s largest oil producer, sank to 106 from 70. India’s ICICI Bank (IBN) has lost 17 percent of its market cap during the past year, compared with an average gain of 9 percent for global peers.

The long term trend of rising standards of living remains in place for the BRICs, but investors still have to contend with market volatility related to problems in the advanced economies.
Allan Conway, head of emerging markets at Schroder Investment Management, said the market still needs clarity on Europe. There’s no clear direction yet in global equities as a result.
“In 2008, we beat the MSCI emerging markets index. The period we suffered most was 2010 when the market had no clear trend. Since then we’ve clawed back and are ahead by about 300 basis points over the MSCI EM and this year as of end of June up 250 basis points over MSCI EM. The challenge for us has been to stay ahead of the curve. If we wait for some incredible plan to come out of Europe, we miss 30 percent of the rally,” he said. “The trick in the coming months are to look for the sign points that show we have moved away from kicking the can down the road and are moving to more long lasting structural changes.”
Dedicated emerging market investment funds that have a heavy weighting in the BRICs have posted 16 straight weeks of withdrawals , losing a net $5.3 billion, according to Cambridge, Mass based fund tracking firm EPFR Global.

The BRIC economies are slowing. They’ve expanded by 4.8 percent on average during the first quarter, but that’s down from nearly 7 percent last year.

BRICs Share Of World Economy Up Four Times In 10 Years - Forbes

 

[luckycharm]

I would like to start a thread to discuss the largest emerging economies, E7+Pakistan, the challenges they are facing right now and recommendations for them to achieve faster growth in future.


China - 70,710,000,000,000
India - 37,668,000,000,000
Brazil - 11,366,000,000,000
Mexico - 9,340,000,000,000
Russia - 8,580,000,000,000
Indonesia - 7,010,000,000,000
Turkey - 3,943,000,000,000


Ranking by overall health of economies: (my personal ranking)

1. China
2. Russia
3. India
4. Brazil
5. Turkey
6. Indonesia
7. South Africa
8. Pakistan

Very Interesting Hello_10, nice thread.

The growth of these economies is very fast and what interests me is the growth of one of these economies will feed the growth of another.

An example is how China's growth, will lead to a growth in India due to trade agreement, tourism, employment... The growth in China and India, will cause higher trade activities between Europe and Asia, thus leading to more economic activity in Turkey ( Turkey being the link between Asia and Europe...

Interesting years to come

 

[Hello_10]

India ranks first in top 10 destinations for outsourcing
Oct 8, 2012

NEW DELHI: India ranked first in the list of top 10 locations for outsourcing business operations in 2011 but it has started facing competition from countries like Phillipines and Indonesia, global property consultant Jones Lang LaSalle (JLL) said in a report.

"India, while still hitting the high notes on the offshoring market, will need to work hard to maintain its edge," JLL India Chairman and Country Head Anuj Puri said in a statement.

Puri said when it comes to offshoring business operations to India, the traditional benefit of availability of a large talent pool, lower costs and quick turnaround time still apply.

Outsourcing to India enables foreign companies to overcome office space costs in their own countries, he added.

"India has the largest english speaking population in the world, ensuring optimal communication customer-vendor communications. However, India is beginning to face stiff competition on the outsourcing front from other markets like Phillipines and Indonesia," Puri said.

The report said that the options for global location decision makers are extending.

"Optimal decisions require a broader and more considered evaluation reflective of changing times. India continues to be a leading player in this environment, supported by its strong fundamentals," JLL Director - Corporate Research Tom Carroll said.

However, he said the global corporations are increasingly focused on productivity, operational efficiency and future scalability, rather than straight cost-saves in the short term and therefore "India will need to ensure it reflects these concerns if it is to retain its leading position".

"India consistently leads top 10 locations for FDI in shared service centres (2003-2011), the statement said.

Malaysia and Poland were at the second and third positions, respectively, accoring to the report.

India ranks first in top 10 destinations for outsourcing: JLL - Economic Times

 

[Hello_10]

India among top-5 global investment destinations
Oct 29, 2012

NEW DELHI: India has emerged as one of the top five investment destinations in the world, primarily on account of large market size and high customer potential, says a survey.

Notwithstanding bullish business prospects, the survey also said that India is perceived as a risky place to make investments.

The consulting firm BDO Global Market Opportunity Index 2012 covered more than 1,000 senior finance officers spread across 14 countries, including India, the US and the UK. The survey examines the views of the company's finance chiefs to expand in specific countries.

In terms of investment destinations, India continued to be at the fourth spot in the list topped by neighbouring China. Other nations in the top five are the US (second), Brazil (third) and Germany (fifth).

The survey attributed India's appeal as attractive investment destination to its large market size, customer potential and cheap labour.

About India, the survey said that the professional services and technology, media and telecoms (TMT) sectors are driving investment in the country.

Besides, planned investment in India is fairly consistent as 32 per cent of Cheif Financial Officers (CFO) surveyed in Saudi Arabia expect to enter this market.

Among others in the top 10 are Russia, the UK, Australia, United Arab Emirrates and Mexico.

"The 'big seven' (China, USA, Brazil, India, Germany, Russia and UK) lead the index as attractive investment markets, due to size and customer potential... (these nations) are the ones that CFOs feel most comfortable investing in," the survey noted.

This year 66 per cent of the CFOs surveyed are setting their sights on a 'big seven' of attractive investment destinations.

Besides, CFOs across the globe are finding it more difficult to conduct business overseas- certainly compared to three years ago on account of poor economic situation, increased regulation and greater competition.

Notably, CFOs consider parts of Europe as risky as the politically unstable countries of the Middle East. Spain is perceived as a riskier investment destination than Egypt. Besides, Greece is seen as more risky than Libya and Syria.

Iran is being seen as most risky to invest in by CFOs, followed by Iraq, Greece, Syria and Libya.

Interestingly, three of the four BRIC countries are considered among the top 20 risky markets, Russia ranks ninth, China 13th, and India 20th. This shows that, while BRIC countries are seen as attractive markets for investment, they also come with some inherent perceived risk.

India among top-5 global investment destinations: Survey - Economic Times

 

[karan21]

Hello I appreciate your efforts in this thread man. Good posts bro.

 

[Hello_10]

E7 Growth Performance Trumps G7
January 2012

It is now three years since the Great Recession ended and profound changes are underway in the world economy. The global economic axis which had been shifting fundamentally away from the advanced economies of Europe and North America to the world’s emerging economies has accelerated sharply over the past four years. Moreover, living standards are rebalancing across the world, rising in the emerging countries but falling in the advanced countries.

The global economy has been severely buffeted in the past few years as it lurches from one crisis to yet another. The bursting of the US housing bubble, the meltdown of the sub-prime mortgage market, the freezing of credit markets, the collapse of Lehman Brothers, the sovereign debt crisis, credit rating downgrades, and the very survivability of the eurozone, have all contributed to the unprecedented battering that is plaguing the global economy.

It’s little wonder that the fallout from these crises has had a profound effect on the structure of the world economy. Interestingly, a comparison between the major advanced economies of the G7 and the seven largest emerging economies – the E7 – reveals some startling differences. Collectively, the E7 bloc which includes China, India, Indonesia, Brazil, Russia, Turkey and Mexico now accounts for close to 31% of world GDP, up from 19% twenty years ago. During this same time period, the G7 has seen its share of world output fall from 51% to 38%.

The impact of the global recession on the G7 and E7 economies has been quite varied. In a nutshell, while the recession and the ongoing economic malaise have knocked the wind out of the G7 economies, the impact on most of the E7 countries has been relatively muted. Five of the G7 economies – Britain, France, Italy, Japan, and the United States – all suffered back-to-back declines in GDP both in 2008 and 2009. Canada and Germany, however, posted declines in GDP on a calendar year basis only in 2009.

In contrast, four members of the E7 group – Brazil, Mexico, Russia, and Turkey – experienced declines in economic activity only in 2009 with the fall in GDP ranging from a low of -0.6% in Brazil to a high of -7.8% in Russia. Moreover, the economies of China, India, and Indonesia rode out the financial storm and sailed through the global recession without posting a single negative year of growth.

Since climbing out of the Great Recession, the recovery has been weak across the board for all the G7 economies and there are growing fears that another economic downturn may be unavoidable. For example, for the G7 group as a whole, growth in GDP averaged 2.7% in 2010 but weakened to 1.3% in 2011 and is expected to slip even further and average just 0.6% this year. In contrast, while a slowdown is also anticipated in all the major emerging economies because of the global inter-linkages, there is no talk of recession. Economic growth in the E7 averaged 7.5% in 2010, 6.0% in 2011 and is projected to slip to 5.2% this year.

It is these divergent trends in growth that have significantly altered the global economic landscape. To put things in perspective, over the four year period from the end of 2007 through to 2011, only four of the G7 economies have regained their pre-recession levels of output. Canada has been the best performer in this group but despite that it is still only 3.1% larger than it was in 2007. The size of Germany’s economy, the second best performer, is 1.8% larger while the United States and French economies have just managed to move ahead of where they were in 2007.

Three of the G7 economies – the United Kingdom, Japan, and Italy – have failed to recover the output lost from the 2008-09 recession and find themselves essentially stuck in what amounts to a long drawn-out economic slump. The UK economy is 2.6% smaller than it was in the pre-recession peak year of 2007, Japan’s is 4.2% smaller, and Italy’s is 4.7% smaller (see Table 2).

In contrast to the G7 countries, the production of goods and services is bigger today in all the E7 economies than it was in 2007. China’s economy is 44.6% larger than it was before the crisis and despite a slowing down of growth its GDP is likely to expand by another 8.2% this year. Similarly, India’s economy is 34.6% larger, Indonesia’s is 25.2% and Brazil’s is 16.5% bigger. Even Mexico’s economy, which is 3.9% larger and, therefore is the E7’s worst performer, has outperformed every single member of the G7.

The major advanced economies now face years of struggle and none of them are likely to see a return to pre-crisis rates of growth for the next few years. Indeed, several of the G7 economies including Britain, France, Germany, and Italy could be heading back into recession as the recovery is increasingly showing signs of coming unstuck. Unemployment is rising again in Europe, retail sales are falling, and although inflation has started to edge down it still remains above central bank targets. Moreover, the need to reduce budget deficits and reign in unsustainable debt-to-GDP ratios – which are at alarmingly high levels in all the G7 economies – risks further entrenching the recessionary conditions in which these economies find themselves stuck.

With the outlook for growth diverging sharply, the G7 countries are split into two camps – the United States and Canada are expected to grow at around 2% in 2012 and Japan’s economy is also likely to see its output rise by a similar amount as the country rebuilds from last year’s devasting tsumani and earthquake. On the other hand, the outlook for European economies is darkening. With the debt crisis in the eurozone countries continuing to swirl and showing no sign of easing, the IMF in its latest forecast expects the region’s GDP to contract by 0.5% this year. Italy, the regions third largest economy is projected to decline by 2.2%, by far the worst performer of any G7 economy.

It is now abundantly clear that, more than two years after the end of the Great Recession, a sustained recovery remains stubbornly elusive for the major advanced economies. Despite massive amounts of monetary and fiscal stimulus, the rate of growth in all of the major advanced economies has been sharply below their respective long-term averages. Moreover, constrained by large debts and deficits, not a single G7 country is expected to achieve growth rates above, or even at, its long-term average for several more years.

In contrast, since 2007, growth in the economies of the E7, despite the ongoing global turbulence, has not deviated much from their long-term averages. By 2020 this bloc, given the current trends, will surpass the G7 and account for a greater share of world output. This, in turn, will lead to a shift in the current geo-political power structure. Whether this will be muted or more pronounced remains to be seen.

E7 Growth Performance Trumps G7 / Ranga Chand - International Economist and Financial Author