The tortoise and the hare: Advanced and Emerging economies

WALSALL, U.K. - Sept. 13, 2013 - PRLog -- The breaking economic news is no longer about the doom and gloom for the Eurozone or the US. But now it is the Indian Rupee crisis which is being reported, one of the jewels in the crown of the emerging world. India and other high powered emerging economies, such as China, were seen as part of a long term solution to the worlds post financial crisis. However now they are being considered the problem by some people. For years these same people have been telling anyone that would listen that the future lay in the emerging world with reference mainly to China and India. Never before had two such populous countries, each with well over a billion people, grew so strongly and in tandem. The emerging economy situation was in fact strengthened by the global financial crisis, which most of them sailed through. It was during 2009 where advanced economies saw the greatest fall in GDP, a collective 4% fall, Britain’s being more like 5%. However during this time emerging economies grew. Some, such as, China grew 9% and India grew 7% booming through the crisis. After the crisis the world seemed destined for two hangovers: the financial hangover that meant banking systems would need a prolonged period of convalescence, and the fiscal hangover requiring tax rises and spending cuts. Emerging economies, mostly free of such constraints were where exporters needed to be. Britain’s exporters came under a lot of criticism after the feeling was that too much was sold to sclerotic Europe and too little to the Brics (Brazil, Russia, India and China). A powerful indictment of British failure. But now with the Brics apparent crumbling. Where does their economy go from here? Last year only China, which grew 7.8%, achieved the kind of growth associated with the Brics. Brazil, 0.9%, India, 3.2% and Russia, 3.4%, barely deserved to be members of the club. However on the other hand, emerging economies, have picked up, including Britain and also the Eurozone, America and Japan. On one estimate, advanced countries contributed more to global growth in the second quarter than the emerging world, the first time this has happened for years. So is it time to throw in the towel? No. Most emerging economies have years of strong growth ahead of them, including China. We are simply seeing an adjustment there from three decades of super-strong growth, averaging an incredible 9.5% a year from 19789 to 2008, to a more modest and sustainable rate of 7%. So predictions of a collapse look likely to be wrong again after years of predictions of Chinese collapse. As for India it may be a little more difficult to sustain such high growth maybe even inevitable that it will not. With a situation which mirrors the crossroads it faced in 1991 when there was a chronic current account deficit and a run on the Rupee. The prospects for India are a lot cloudier than they were. As for the rest of the emerging world, there remain plenty of bright spot, in Asia, central and eastern Europe, sub-Saharan Africa and Latin America. Even at average emerging world growth of 5%, some countries will achieve more than this, and this year they will include the likes of Vietnam, Indonesia, Ghana and Nigeria." type="IN/Share">It isn’t very often that you can describe the world as being turned upside down, but for the moment that is exactly what is happening. The breaking economic news is no longer about the doom and gloom for the Eurozone or the US. But now it is the Indian Rupee crisis which is being reported, one of the jewels in the crown of the emerging world.
India and other high powered emerging economies, such as China, were seen as part of a long term solution to the worlds post financial crisis. However now they are being considered the problem by some people. For years these same people have been telling anyone that would listen that the future lay in the emerging world with reference mainly to China and India. Never before had two such populous countries, each with well over a billion people, grew so strongly and in tandem.
The emerging economy situation was in fact strengthened by the global financial crisis, which most of them sailed through. It was during 2009 where advanced economies saw the greatest fall in GDP, a collective 4% fall, Britain’s being more like 5%. However during this time emerging economies grew. Some, such as, China grew 9% and India grew 7% booming through the crisis.
After the crisis the world seemed destined for two hangovers: the financial hangover that meant banking systems would need a prolonged period of convalescence, and the fiscal hangover requiring tax rises and spending cuts.
Emerging economies, mostly free of such constraints were where exporters needed to be. Britain’s exporters came under a lot of criticism after the feeling was that too much was sold to sclerotic Europe and too little to the Brics (Brazil, Russia, India and China). A powerful indictment of British failure.
But now with the Brics apparent crumbling. Where does their economy go from here? Last year only China, which grew 7.8%, achieved the kind of growth associated with the Brics. Brazil, 0.9%, India, 3.2% and Russia, 3.4%, barely deserved to be members of the club.
However on the other hand, emerging economies, have picked up, including Britain and also the Eurozone, America and Japan. On one estimate, advanced countries contributed more to global growth in the second quarter than the emerging world, the first time this has happened for years.
So is it time to throw in the towel? No. Most emerging economies have years of strong growth ahead of them, including China. We are simply seeing an adjustment there from three decades of super-strong growth, averaging an incredible 9.5% a year from 19789 to 2008, to a more modest and sustainable rate of 7%. So predictions of a collapse look likely to be wrong again after years of predictions of Chinese collapse.
As for India it may be a little more difficult to sustain such high growth maybe even inevitable that it will not. With a situation which mirrors the crossroads it faced in 1991 when there was a chronic current account deficit and a run on the Rupee. The prospects for India are a lot cloudier than they were.
As for the rest of the emerging world, there remain plenty of bright spot, in Asia, central and eastern Europe, sub-Saharan Africa and Latin America. Even at average emerging world growth of 5%, some countries will achieve more than this, and this year they will include the likes of Vietnam, Indonesia, Ghana and Nigeria.

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