UK: Deloitte Monday Briefing: Emerging Market Growth Lead Narrows

Last Updated: 4 November 2013
Article by Ian Stewart

Most Read Contributor in UK, August 2017

* The Global Financial Crisis has confirmed the standing of emerging or developing market nations as major players in the global economy. The strong performance of these economies since 2007 demonstrates that they can grow independently of the rich world. In the last five years, emerging economies have accounted for about 70% of global growth.

* Now, with growth in the rich world picking up and emerging economies facing headwinds, the growth gap between the two is narrowing.

* Monetary tightening, lower commodity prices, reduced inflows of foreign capital and relatively weak institutions and rules are all weighing on emerging economies.

* The trend this year has been for economists to become less positive about growth in emerging economies and rather more positive about prospects for the rich world.

* Over the next five years, the International Monetary Fund expects emerging economies to grow at about two-and-a-half times the rate of rich countries. So, outperformance continues – albeit on a lesser scale than in the last five years when emerging economies grew at ten times the rate of rich economies.

* Next year, for the first time since 2007, rich countries are expected to contribute more to global growth than developing economies.

* Emerging economies is helpful shorthand for what is a diverse group of countries. Over the next few years, the most vigorous emerging nations, with growth rates well above 5.0% a year, are likely to be found in Asia and sub-Saharan Africa. Slower-growing emerging economies are concentrated in Eastern Europe and South America.

* The BRIC nations reflect this split. China and India are likely to be the world's fastest growing major economies over the next five years. The IMF expects the other half of the BRICs, Brazil and Russia, to grow at a much slower pace - at about the same rate as the US.

* China dominates within the emerging markets. Its economy is 50% larger than the combined economies of India, Brazil and Russia. Next year, China is likely to account for half of all growth from emerging markets and about a quarter of global growth. Despite a slowing trend growth rate, China is likely to remain the world's fastest growing major economy for some time.

* If you are looking for growth in the global economy, you are most likely to find it in emerging markets. Over the next five years, the IMF thinks emerging economies will grow at an average rate of 5.2% and developed economies will post growth of 2.2%.

* But for most emerging economies growth is likely to be a little slower than in recent years. Meanwhile, the rich world is starting to recover. The growth gap between the rich and the developing world is here to stay, but it is narrowing.


UK's FTSE 100 ended the week up 0.2%.

Here are some recent news stories that caught our eye as reflecting key economic themes:


* Revised Bank of England data showed that UK households increased borrowing on loans and credit cards in Q3 2013 at the fastest pace in over 5 years
* The number of loans agreed for home purchases rose in September to its highest level since 2009
* The chief economist of Nationwide warned that British home buyers may risk overstretching themselves "if demand continues to strengthen while the supply of property remains constrained"
* The UK is the best country in the world for obtaining credit, according to the World Bank's Ease of Doing Business Survey, although it has fallen from 19 to 28 in the rankings in terms of ease of starting a new company
* The French Football Federation confirmed a general strike at the end of November, after the government confirmed that its 75% tax on incomes over €1m would apply to football clubs
* The Spanish economy grew by 0.1% in the third quarter of 2013, ending a run of nine consecutive quarters of decline
* Ratings agency Fitch revised Spain's outlook to "stable" from "negative", stating that the country's economy is now on "a surer footing"
* Bill Gates invested €113.5m in Spanish building firm FCC, with Spain's industry minister declaring that the investment proved "greater confidence and credibility" in the Spanish economy
* The London Stock Exchange is to launch the Islamic Market Index to identify investment opportunities compliant with Islamic principles
* US President Barack Obama vowed to "do even more to make the case for investing in America", with data showing that the foreign direct investment to the US fell by 28% in 2012
* Japanese Prime Minister Shinzo Abe said in a speech that he plans to use higher-than-expected tax revenue to fund future economic stimulus spending rather than relying on issuing new debt
* Japanese housing starts rose by an annual rate of 19% in September, with increased demand for cheaper mortgages following the Bank of Japan's unprecedented easing of monetary policy
* Mashreq Bank, which operates in the United Arab Emirates, announced it is to open its first unstaffed and fully electronic branch next year, offering facilities including video conferencing with bank employees
* Morgan Stanley Research predicted that global wine shortages may occur in coming years due to increased consumption, in particular from China and America, and falling production in Spain, France and Italy
* Official data shows that the fastest growing type of household in the UK is the "multi-family", where offspring come home and bring their partners
* Research by Freshfields Bruckhaus Deringer shows that in only a quarter of reported cases of cyber-attacks does a company's share price fall by more than 1%, with the dangers of such attacks potentially underestimated by investors
* Shares in Eastman Kodak were re-listed on the New York Stock Exchange, with the former film manufacturer having sold its consumer film unit to focus on providing imaging and technology services to businesses
* As part of its expansion plans, Hotel group Marriott International announced that it will open on average 1 hotel in Asia every 8 days until 2016
* Scientists have discovered that eucalyptus trees in Western Australia have small traces of gold embedded in their leaves, as the trees' roots absorb minerals from as deep as ten stories below the surface – bank branch

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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