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Emerging Markets In The Spotlight

Discover the six most promising economies in Asia, Africa, and Latin America and learn about the factors that make a country promising for investment. This article explores the impact of risk-on, risk-off financial markets, growth slowdown in China, monetary tightening in the US, and more. Find out which countries are worth considering and what factors to look for in a promising economy.

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Emerging Markets In The Spotlight

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  1. Emerging Markets In The Spotlight The Six Most Promising Economies in Asia, Africa and Latin America Atradius Dutch State BusinessBert BurgerICTF's International Credit Professionals Symposium in Europe, Madrid, May 22 - 24, 2016

  2. Emerging Markets, Are They Promising? • Risk-on, risk-off financial markets > impact on portfolio investment flows Turkey, South Africa and Indonesia vulnerable due to combination of high external financing requirement and relatively low buffers • Growth slowdown China & low commodity prices Mongolia, Mozambique, Zambia, Malaysia, Chile etc. • Monetary tightening in the US > stronger US dollar, weakening EM currencies Not a real problem for now • World GDP growth still driven by Emerging Markets

  3. Emerging Markets, Are They Promising? Yes, but not all of them: • India • Philippines • Iran • Colombia • Peru • Kenya Not any more (maybe never have been): • Mozambique

  4. India The bright side: • Stable political situation, reform-oriented policy (Modi!) • High economic growth, relatively small exposure to China • Low commodity prices But: • Reforms go slow • Not easy to do business • High leverage corporate sector vulnerable to interest rate rises & weaker rupee

  5. Philippines Strength: • High economic growth (moderate impact China, strong domestic demand) • Current account helped by remittances But: • Weak institutions, corruption • Inequality, elite dominates politics • Violence (Mindanao) Unclear: • President Dutarte’s policy

  6. Iran Positive: • Favourable economic growth prospects • Current account surplus • Low public and external debt levels But: • Political situation outlook unclear • Still sanctions • Western banks very cautious

  7. Colombia Good: • Good economic policy • High investments growth • Large reserves • Peace talks Risks: • Low oil price • Internal dissent at FARC

  8. Peru Positive: • Good economic policy (whoever wins the elections) • High and stable GDP growth, low inflation • Rising middle-income class • Solid public and external finances • Investment grade status, positive for FDI Negative, but not so much: • Reliance on commodity exports Source: IHS

  9. Kenya Positive: • Diversified economy • Efforts to improve infrastructure • Improved access of population to financial services • Relatively well-developed financial sector • Low, well-financed external debt Negative: • Terrorism & civil unrest • Weak public finances

  10. Mozambique Good: • Natural resources • High investements growth, FDI Bad: • Dependency on commodity exports • No diversification of economy • Weak public and external finances • El Niño Ugly: Poor governance

  11. What Makes A Country Promising? Need to have (at least 4 of 6) • Sound economic policy • Strong institutions • Solid public and external finances • Developed infrastructure • Diversified economy • Political stability Nice to have • Large population, middle class • Commodities (but not too much) ‘Do Not Underestimate The Human Factor’

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