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Outlook still bullish - EY - Global

Our second Rapid-Growth Markets Forecast indicates that the balance of opportunity and advantage for business still lies within rapidly growing countries.

If the  immediate growth prospects for rapid-growth markets have weakened a little since the first set of forecasts, their outlook is considerably more cheerful than for the developed economies in Europe and the United States.

RGM exporters threatened by Eurozone crisis

Although the Eurozone crisis is only one of several factors slowing growth across the RGMs, it will remain potentially the major risk until it is resolved. The business impact of an escalation of the crisis would be particularly serious for RGM exporters who would be exposed to significantly weaker demand from Europe.

Similarly, the many companies active in Eastern Europe would be affected: 70% of Czech Republic goods and 60% of Poland’s exports head for the Eurozone. But companies selling out of other markets would also be seriously impacted, especially those operating in Africa: around one third of South Africa, Egypt and Ghana’s exports go to the Eurozone.

The promise of emerging Africa

Our forecast draws particular attention to important improvements in the business climate in many African countries. Growth in sub- Saharan Africa from 2003-10 averaged 5.7%, and is expected to have been around 5-5.5% in 2010 and 2011. This will make Africa the second fastest-growing region in the world.

Africa’s long standing problems are still evident in many countries – food shortages, high inflation, poverty, corruption and autocracy. But democracy is making strides across the continent and there has been a steady improvement in economic policies.

Our forecast refers to the World Bank’s list of best reforming countries which now includes Rwanda, Mauritius, Sierra Leone, Burundi, Uganda and Liberia as notable for their efforts to make it easier to do business. Nigeria, Ghana and Kenya are also said to be making progress.

Political change

Political risk is a constant in almost all parts of the world, not least because of popular pressures for change. The Arab Spring presents opportunities to widen and deepen economic freedoms, improve the ease of doing business and raise the standard of living. Growth in Egypt, Tunisia and Libya will also be lower as a result of disruption and the loss of income from tourism.

In Russia meanwhile, recent popular protests highlight the changes taking place in Russian society with demands of better governance and less corruption. All rapid-growth markets, however, need the investment, technical know how and long term commitment that international companies can best provide.

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