Crash Test
Emerging markets have “passed the crash test”. That is they have not collapsed during the global downturn. In fact current sentiment has now turned so positive for emerging markets that this itself creates a risk in its own right from the danger that the markets do not meet inflated expectations, so causing a change in attitude and a possible sell off.
There is increasing domestic consumption in emerging markets which is an indicator of their sustainable growth prospects, meaning they are becoming less dependent on developed markets for growth.
They have an important role in commodity markets that will continue to grow, and emerging economies will continue to further their presence in global stock indices.
The Chinese economy, often perceived to be dependent on exports for growth, has been less reliant on overseas demand for its manufactured goods than people have believed. Internal growth has been fuelled by internal investment by regional banks and governments. Indeed, the loan to deposit ratio in Chinese banks is among the lowest in the world.
However loan growth has picked up and this has been helping support corporations through the downturn, while government stimulus packages were paying for investment in internal projects that should support economic growth over the next three to five years.
However there is some concern that this state stimulus will slow and that fiscal policy will be tightened creating a drag on the economy.
Brazil has come off the lows of 2008 and over the longer term there is reason to believe the country could achieve annual growth rates of around 5% over the next 10 years.
Brazil is the biggest economy in Latin America and is expected to deliver about 4.4% next year. Very interestingly, the International Monetary Fund recently said that without any major shocks, Brazil’s economy is set to become the fifth largest in the world by 2016. Now there’s a heads-up!
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Article Source: ArticlesBase.com – Emerging markets pass ‘crash’ test
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