Emerging Trends in Developing Countries

Emerging Trends in Developing Countries Lección inaugural Master en Desarrollo, Instituciones e Integración Económica Álvaro Ortiz Vidal-Abarca - Chief Economist Cross Emerging Markets BBVA Research Valencia, October 2013

Multidimensional Emerging Markets Trends

Income & Wealth Inclusive Growth

Poverty and Inequality

Demography &

Urbanization

The Rise of Emerging Middle

class

Infrastructure & Financial

Deepening

Technology, Productivity &

Education

Vulnerability &

Resilience

Openness

& Trade

Increasing World

Presence

Institutions

Wealthier and Healthier: Emerging Markets are Catching Up with Developed World but still a sizeable Gap

Income & Wealth

First, the static picture… to identify where do we stand?

World: Wealth and Health (2012) (GDP per cápita in US$ and Life Expecancy) Source: Gapminder through World Bank Data

Developed Economies

Emerging Economies

Frontier Economies

Income & Wealth

The Catch Up will continue: GDP per capita growth differences will remain important…

0 1 2 3 4 5 6 7 8 9 10

Central and eastern Europe

Commonwealth of Independent States

Newly industrialized Asian economies

Developing Asia

Latin America and the Caribbean

Middle East and North Africa

0 1 2 3 4 5 6 7 8 9 10

Advanced economies

Major advanced economies (G7)

European Union

Other advanced economies

1990-00

2000-10

2010-20

GDP per capita Growth Rate (1980-2020) (% yoy, in nominal PPP-adjusted USD) Source: BBVA Research

Ad

van

ced

E

co

no

mie

s Em

erg

ing

E

co

no

mie

s

Income & Wealth

Which is allowing Emerging economies to increase their role in global growth

Contribution to global growth by period and country groups (1980-2022) (in percentage points) Source: BBVA Research and IMF

0

1

2

3

4

5

80s 90s 00s pre crisis Crisis 2012-2022

Advances Emerging

Income & Wealth

The “new growth” will be increasingly based in EM with a bias in the pacific region

Africa

Oceania

Emerging

Asia

Japan

6.8

4.9

Eastern Europe

56.4

1.7

1.0

6.4

Middle East

4.5

Western

Europe 10.9

Latin America

North America

7.5

Pacific Region

77.5%

Expected contribution to global growth between 2012 and 2022 (%) Source: BBVA Research and IMF

Income & Wealth

Emerging Markets are increasing their share in World GDP but Balance of Power Quotas remain unchained

Increasing World Presence

Emerging markets are increasing their share in world GDP

Share of world GDP: developed and emerging markets (%) Source: IMF/WEO

0

10

20

30

40

50

60

70

80

90

100

1980 1990 2000 2007 2013 2018

Emerging Economies Developed Economies


China and India play in another league

Incremental GDP between 2012 and 2022 (% share of world growth and bn USD for the 3 big players) Source: BBVA Research and IMF/WEO

1242815727

4756

129714092

5036

0

2500

5000

7500

10000

12500

15000

17500

20000

22500

25000

27500

China USA India

2012 2012-2022

EAGLEs57%

Nest10%

Other EMs3%

G717%

Other DMs5%

RoW8%


Other relevant players in Asia, as well as in Latin America and Europe

Incremental GDP between 2012 and 2022 and GDP level in 2012 [EAGLEs] (bn USD) (incremental GDP in y-axis and 2012 level below country labels) (bubbles are proportional to 2012 level) Source: BBVA Research and IMF/WEO

Indonesia1219 Brazil

2363Russia2520

Korea1618

Japan4623

Turkey1126

Germany3207 Mexico

1768UK

2335 Taiwan905

G6 avg.2620

300

400

500

600

700

800

900

1000

1100

1200

1300


And there are more candidates, some of them really close to the threshold

Incremental GDP between 2012 and 2022 and GDP level in 2012 [Nest] (bn USD) (incremental GDP in y-axis and 2012 level below country labels) (bubbles are proportional to 2012 level) Source: BBVA Research and IMF/WEO

G6 avg.2620

Egypt540

Nigeria453

Thail.655

Australia967

S.Arabia744

France2260

Canada1451

Colombia500

Vietnam322

Malaysia498

Poland806

Spain1415

Bang.307

S.Africa580

Philip.425

Iraq156

Peru328

Argentina745

Pakistan517

Iran1002

Chile322

G6 min.(Italy)1808

100

150

200

250

300

350

400

450

500


A new global economic order is pushing for a new view on international relations

16

84

50 50 55

45

67

33

Emerging & Developed Economies(%) Source: IMF and BBVA Research

Emerging & Developing Economies

Developed Economies

Population GDP IMF Voting Stock Mket

Capitalisation


Reducing Poverty but Rising Inequality Social Protection should increase to cope with increasing social demands

Inclusive Growth

The EM growth has been “somehow” a pro poor growth

Poverty: % of People living under 1.5$ per day (at 2005 ppp prices) Source: IMF Regional Economic Outlook: Asia and Pacific

Selected Asia: Change in Poverty Headcount Ratio (in percentage points, since 1990) Source: IMF Regional Economic Outlook: Asia and Pacific

Inclusive Growth

But with raising inequality in some fast growth areas

Change in Gini Index since 1990 (percentage points) Source: UNICEF

Change in Gini Index since 1990 (percentage points) Source: IMF Regional Economic Outlook: Asia and Pacific

5 0 5 1 0 1 5

C e n t r a l a n d E a s t e r n E u r o p e

L a t i n A m e r i c a a n d t h e C a r i b b e a n

M i d d l e E a s t a n d N o r t h A f r i c a

S u b - S a h a r a n A f r i c a

A S E A N

N I E s

I n d u s t r i a l A s i a

S o u t h A s i a

O t h e r A s i a

Average

Weighted Average by population

Inclusive Growth

The Safety Net on EM is still far from Western Levels…

Old-age pension beneficiaries (% of population above retirerment age) Source: ILO

Inclusive Growth

Unemployment effective coverage worldwide (% of unemployed) Source: ILO

Inclusive Growth

In many aspects…

One of the reason is low Fiscal Revenue…

Fiscal revenue and spending 2010 (% GDP) Source: IMF

Inclusive Growth

Which limits Social Spending and inclusiveness

Social spending (% of GDP) Source: IMF

Pension

2010 1/

Health

2010 1/

Education

2007 1/

ASEAN-5

Indonesia 0.9 1.3 3.5

Malaysia 2.9 2.9 4.5

Philipines 1.1 1.4 2.6

Singapore 0.6 1.0 3.2

Thailand 0.8 1.6 4.9

Other Asian Economies

China 2.2 2.2 1.9

India 1.7 0.9 3.2

Vietnam 1.6 1.5 5.3

Regional average

ASEAN-5 1.3 1.6 3.7

Advanced 7.4 7.0 -

Emerging 4.2 2.7 -

Education and inclusiveness Source: IMF Regional Economic Outlook: Asia and Pacific

Health and inclusiveness Source: IMF Regional Economic Outlook: Asia and Pacific

Inclusive Growth

But in some dimensions is improving very fast compared with previous historical experiences

Health protection coverage for selected countries (% of total population) Source: ILO

Inclusive Growth

Population will “moderate” but the “premium” is still alive and Households will increase Urbanization & Agglomeration a new challenge


Population will gradually decline in EM but still maintains an important premium with developed

World Labor Force: Ratio of Working Age to non Working Age Population Source: World Bank

-2

-1

0

1

2

3

4

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

2035

2040

2045

2050

Russia

Turkey

Brazil

Mexico

G7

Mid term

Long term

Demography & Urbanization

-2

-1

0

1

2

3

4

1950

1955

1960

1965

1970

1975

1980

1985

1990

1995

2000

2005

2010

2015

2020

2025

2030

2035

2040

2045

2050

China

Korea

India

Indonesia

G7

Mid term

Long term

Labor Force Population Growth (% yoy) Source: BBVA Research and UN

...But Household size will also decline limiting the population decline impact in some goods

1

2

3

4

5

6

7

8

0 1 2 3 4

House

hold

siz

e

ln of real PPP-adjusted GDP

Household Size and GDP Per cápita (in members ans log of gdp per capita) Source: BBVA Research and UN

World Household Size (members per houesold unit) Source: BBVA Research and UN

2,0

2,5

3,0

3,5

4,0

4,5

5,0

5,5

6,0

6,5

7,0

Fin

land

Germ

any

Neth

erla

nds

Unite

d K

ingdom

Belg

ium

Fra

nce

Canada

Hungary

Lith

uania

Bulg

aria

Russia

Spain

Irela

nd

Pola

nd

Slo

venia

Uru

guay

Israel

Bosn

ia a

nd H

erze

govin

aBra

zilSri L

anka

FYR

Mace

donia

Costa

Rica

Panam

aBotsw

ana

Mala

wi

Mexico

Belize

Para

guay

Vie

tnam

Bangla

desh

Iran

Tanza

nia

Chad

Tunisia

Centra

l Africa

n R

epublic

India

Sudan

Jord

an

Yem

en


Different Population Pyramids will create different oportunities and challenges…

Population pyramids for selected economies (2010) Source: BBVA Research and UN

G7 Countries

4 3 2 1 0 1 2 3 4

0-4

10-14

20-24

30-34

40-44

50-54

60-64

70-74

80-84

90-94

100+Female Male

5 4 3 2 1 0 1 2 3 4 5

Female Male

Eagles Ageing Advanced Eagles Populating Premiun

5 4 3 2 1 0 1 2 3 4 5

Female Male


…Urbanization will increase very fast in some of the regions…

0

10

20

30

40

50

60

70

80

90

19

60

19

65

19

70

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75

19

80

19

85

19

90

19

95

20

00

20

05

20

10

20

15

20

20

20

25

West Europe N.América East Europe

Asia Latam Africa

-0,1

0

0,1

0,2

0,3

0,4

0,5

0,6

0,7

0,8

19

70

19

75

19

80

19

85

19

90

19

95

20

00

20

05

20

10

20

15

20

20

20

25

West Europe N.América East Europe

Asia Latam Africa

World Urbanization Rates(1980-2020) (Urban population as a % of total) Source: United Nations

World Urbanization Rates(1980-2020) (Annual Change in Urbanization Rates) Source: United Nations


Regional Aggregates mask some rapid changes in some countries (Andeans & South East Asia)


World Urbanization Rates(2030) (Urban population as a % of total) Source: United Nations

World Urbanization Rates(2011) (Urban population as a % of total) Source: United Nations

…and we will observe an intensive Urban Agglomeration process specially in Asia

Percentage of urban population and agglomerations by size class Source: UN Urbanization Prospects, 2011 revision

2011 2025


The “Emerging Middle Classes” revolution has already started changing consumption patterns and social demands

The Rise of EM Middle Classes

…The EM Middle Classes revolution accelerated at the beginning of this century…

0

1000

2000

3000

4000

5000

6000

19

80

19

82

19

84

19

86

19

88

19

90

19

92

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19

98

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00

20

02

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04

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06

20

08

20

10

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12

20

14

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16

20

18

20

20

Affluent High Middle Class Medium Middle ClassLow Middle Class Low Income Poor

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

19

80

19

82

19

84

19

86

19

88

19

90

19

92

19

94

19

96

19

98

20

00

20

02

20

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20

06

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08

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20

20

Affluent High Middle Class Medium Middle Class

Low Middle Class Low Income Poor

Estimation of income distribution by GDP per capita in emerging economies (1980-2020) (millions of people and % of total population; original data in real PPP-adjusted USD) Source: BBVA Research

Slow Motion Distribution changes Fast Track Slow Motion

Distribution changes Fast Track

Affluent (>40000 USD) High Middle Income (25000 to 40000 USD) Medium Middle Income (15000 to 25000 USD)

Low Middle Income (5000 USD to 15000 USD) Low Income (1000 USD to 5000 USD) Poor( <1000 USD)

The Rise of Emerging Middle Classes

… and is being specially intensive in some areas…

0

500

1000

1500

2000

2500

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

0

100

200

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400

500

600

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

Estimation of income distribution by GDP per capita in emerging economies regions (1980-2020) (millions of people and % of total population; original data in real PPP-adjusted USD) Source: BBVA Research

0

50

100

150

200

250

300

350

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

0

400

800

1200

1600

2000

19

80

19

82

19

84

19

86

19

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19

92

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96

19

98

20

00

20

02

20

04

20

06

20

08

20

10

20

12

20

14

20

16

20

18

20

20

East Asia South Asia

Emerging Europe Latam


Affluent (>40000 USD) High Middle Income (25000 to 40000 USD) Medium Middle Income (15000 to 25000 USD)

Low Middle Income (5000 USD to 15000 USD) Low Income (1000 USD to 5000 USD) Poor( <1000 USD)

We will observe a gradual change in consumption patterns…

Consumption Patterns in S. Korea (1980-2010): (spending distribution by COICOP groups. ( PPA Adjusted GDP per cápita) Source: BBVA Research

Emerging Markets Consumption Patterns (GDP pre capita order, % en consumer price index basket, 2012) Source: BBVA Research & IMF

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1980 (6.095$) 1990 (13.068$) 2000 (20.901$) 2010 (29.717$)

Food & Non. Alc. Beberages Tobacco & Alcohol

Dressing & Shoes Housing

Menaje Health

Transport Communications

Leisure & Culture Education

Hotels and Catering Other Business Services

0

10

20

30

40

50

60

70

80

90

100

Nig

eri

a

Pakis

tán

Vie

tnam

India

Fili

pin

as

Egip

to

Ucr

ania

Taila

ndia

Perú

Colo

mbia

Sudáfr

ica

Bra

sil

Turq

uía

Méxic

o

Mala

sia

Rusi

a

Arg

entina

Chile

Polo

nia

Core

a


Population, Wealth Creation, Urbanization & Agglomeration will generate pressures on Infrastructure. Financial Deepening will help

Infrastructure & Financial Deepening

Income transition and changing consumption patterns: auto industry

Increase of world car fleet by decades (millions of units) Source: BBVA Research

GDP per capita (PPP-adj. USD) and car ownership (units per 1,000 people) Source: BBVA Research

EAGLEs = Brazil, China, India, Indonesia, Korea, Mexico, Russia, Taiwan and Turkey Nest = Bangladesh, Pakistan, Malaysia, Philippines, Thailand, Vietnam, Argentina, Chile, Colombia, Peru, Poland, Egypt, Nigeria, South Africa


0

50

100

150

200

250

300

350

1980-1990 1990-2000 2000-2010 2010-2020

China EAGLEs exChina Nest US G6 Others

0

100

200

300

400

500

600

7 8 9 10 11 12

Car

ow

ners

hip

(units

per

1,0

00 p

eople

)

log of GDP per capita (real PPP-adjusted USD)

G7 (2020)

G7 (1980)

EAGLEs (2020)

EAGLEs

(1980)

Nest

(1980)

Nest

(2020)

-100

Expected annual increase in car fleet for the next decade concentrated in Asia and Latam

0% ≥8% 4% 2% 6%

Expected annual increase in World Car Fleet (2010-2020) (% yearly growth) Source: BBVA Research


Thus infrastructure needs will continue to grow… specially in the high growth areas

Power

Transportation

Mobile

Fixed

Water

Sanitation

0

100

200

300

400

500

600

700

800

900

1.000

2012 2015 2018 2021 2024 2027 2030

USD billions

Annual Infrastructure Investment Needs in Developing Markets: Changes 2010-2030 ( Total in USD bns) Source: World Bank

0

50

100

150

200

250

300

350

AFR EAP ECA LAC MNA SAR

USD billions

Power Transportation Telecoms Water/Sanitation

AFR: SubSaharan Africa, EAP:East Asia Pacific, ECA: Eastern Europe and Central Asia, LAC: Latin America, MNA: Middle East N Africa, SAR:South Asia

Regional Infrastructure Investment Needs in Developing by Markets 2030 ( Total in USD bns) Source: World Bank


But remember that the fiscal base is till low so new forms of financing are coming

-10

10

30

50

70

90

110

130

150

170

1984 1987 1990 1993 1996 1999 2002 2005 2008

Energy Telecommunications Transport Water

Public Private partnership infrastructure projects (in USD bns) Source: World Bank

0

10

20

30

40

50

60

70

0

20

40

60

80

100

120

140

160

180

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

Other developing Brazil China India Russia Turkey

Public Private partnership infrastructure projects by Countries (in 2005 USD bns) Source: World Bank


Private Credit to GDP: Changes 1998-2008 (Average Annual Change in the ratio) Source: BBVA Research

And the traditional “financial deepening” will acceletareDireccion Completa

Private Credit to GDP: Changes 1998-2008 (Average Annual Change in the ratio) Source: BBVA Research


Facing a global productivity slowdown but with still higher productivity growth than developed

Countries. Younger and increasingly well prepared labor force: A real challenge for Developed

Technology, Productivity & Education

Total factor productivity is slowing down but EM premium is still alive

-1,5

-1,0

-0,5

0,0

0,5

1,0

1,5

2,0

2,5

WEurope USA Japan Europe Latam Asia M.East Africa

90-95 95-00 00-05 05-12

Total Factor Productivity Growth (1990-2012) (median, 5 years mov.avg growth rates) Source: Total Economy Database and Own Calculations)


Education

In some regions Education performance is near the OECD average…and human capital is not far from ours

Secondary school student performance (score; 2009) Source: BBVA Research and OECD PISA Report

Education index* and median age (2010) Source: Mckinsey (2012)

*Median Age

*Hum

an C

apital In

dex


Education

0

10

20

30

40

50

60

70

80

90

100

Pakis

tan

Nig

eri

aBangla

desh

S.A

fric

aIn

dia

Vie

tnam

Indonesi

aC

hin

aM

exic

oPhili

ppin

es

Egypt

Peru

Bra

zil

Mala

ysi

aC

olo

mbia

Turk

ey

Thaila

nd

Fra

nce UK

Chile

Japan

Italy

Avg G

7A

rgentina

Pola

nd

Russ

iaU

kra

ine

US

Kore

a

Differences in enrolment are centered in tertiary education

School enrolment (total enrollment over population of corresponding age; 2010*) Source: BBVA Research and World Bank

*Or latest year available

Secondary education Tertiary education

More divergences in tertiary education

0

10

20

30

40

50

60

70

80

90

100

Pakis

tan

Nig

eri

aBangla

desh

India

Mala

ysi

aIn

donesi

aV

ietn

am

Thaila

nd

Turk

ey

Chin

aEgypt

Phili

ppin

es

Arg

entina

Mexic

oC

hile

Russ

iaPeru

S.A

fric

aU

kra

ine

US

Colo

mbia

Pola

nd

Kore

aItaly

Canada

Bra

zil

UK

Japan

Avg G

7G

erm

any

Fra

nce


Education

Which is increasingly reflected in the Tech content of manufactures and services exports

0

5

10

15

20

25

30

35

40

45

50

55

60

65

70

Egypt

Nig

eri

aBangla

desh

Pakis

tan

Turk

ey

South

Afr

ica

Ukra

ine

Colo

mbia

Chile

Vie

tnam

Peru

Pola

nd

India

Italy

Arg

entina

Russ

iaBra

zil

Indonesi

aC

anada

Germ

any

Mexic

oG

7Ja

pan

US

UK

Thaila

nd

Fra

nce

Chin

aK

ore

aM

ala

ysi

aPhili

ppin

es

0

5

10

15

20

25

30

35

40

Nig

eri

aC

hile

Bra

zil

Peru

Turk

ey

Egypt

South

Afr

ica

Russ

iaC

olo

mbia

Ukra

ine

Pakis

tan

Fra

nce

Italy

Vie

tnam

Arg

entina

Japan

Indonesi

aG

7Bangla

desh

Canada

Germ

any

UK

US

Pola

nd

Kore

aC

hin

aThaila

nd

Mexic

oM

ala

ysi

aPhili

ppin

es

India

ICT goods exports ICT service exports

High Tech Exports (2010) (as % of manufactures exports) Source: World Bank

ICT Goods and Services Exports (as % of goods and service exports) Source: World Bank


Education

The last EM crisis (1990s) are key to explain the Special Resilience to the 2008 crisis and Low Vulnerability

Vulnerability & Resilience

Sovereign Rating Index 2007-2013 Source: BBVA Research by using S&P, Moodys and Fitch Data

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A vulnerability convergence Vulnerability &

Resilience

Risk Thresholds

0.0

50.0

100.0

150.0

200.0

250.0

Un

ited

Sta

tes

Can

ada

Japan

Aust

ralia

Ko

rea

No

rway

Sw

ed

en

Denm

ark

Fin

lan

dU

KA

ust

ria

Fra

nce

Germ

an

yN

eth

erl

an

ds

Belg

ium

Italy

Sp

ain

Irela

nd

Port

ug

al

Gre

ece

Czech

Rep

Bulg

ari

aC

roatia

Hu

ng

ary

Pola

nd

Ro

man

iaR

uss

iaT

urk

ey

Arg

en

tin

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razi

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Co

lom

bia

Mexic

oP

eru

Ch

ina

Ind

iaIn

don

esi

aM

ala

ysi

aP

hilip

pin

es

Thaila

nd

Corporate Sector Debt 2013(% GDP)Source: BBVA Research and BIS

0

20

40

60

80

100

120

140

Un

ited

Sta

tes

Can

ada

Japan

Aust

ralia

Ko

rea

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rway

Sw

ed

en

Denm

ark

Fin

lan

dU

KA

ust

ria

Fra

nce

Germ

an

yN

eth

erl

an

ds

Belg

ium

Italy

Sp

ain

Irela

nd

Port

ug

al

Gre

ece

Czech

Rep

Bulg

ari

aC

roatia

Hu

ng

ary

Pola

nd

Ro

man

iaR

uss

iaT

urk

ey

Arg

en

tin

aB

razi

lC

hile

Co

lom

bia

Mexic

oP

eru

Ch

ina

Ind

iaIn

don

esi

aM

ala

ysi

aP

hilip

pin

es

Thaila

nd

Gross Public Debt 2013(% GDP)Source: BBVA Research and IMF

24

5

18

0

0

50

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250

300

Un

ited

Sta

tes

Can

ada

Japan

Aust

ralia

Ko

rea

No

rway

Sw

ed

en

Denm

ark

Fin

lan

dU

KA

ust

ria

Fra

nce

Germ

an

yN

eth

erl

an

ds

Belg

ium

Italy

Sp

ain

Irela

nd

Port

ug

al

Gre

ece

Czech

Rep

Bulg

ari

aC

roatia

Hu

ng

ary

Pola

nd

Ro

man

iaR

uss

iaT

urk

ey

Arg

en

tin

aB

razi

lC

hile

Co

lom

bia

Mexic

oP

eru

Ch

ina

Ind

iaIn

don

esi

aM

ala

ysi

aP

hilip

pin

es

Thaila

nd

External Debt 2013(% GDP)Source: BBVA Research and IMF

41

7

31

1

10

02

-10.0

10.0

30.0

50.0

70.0

90.0

110.0

130.0

150.0

Un

ited

Sta

tes

Can

ada

Japan

Aust

ralia

Ko

rea

No

rway

Sw

ed

en

Denm

ark

Fin

lan

dU

KA

ust

ria

Fra

nce

Germ

an

yN

eth

erl

an

ds

Belg

ium

Italy

Sp

ain

Irela

nd

Port

ug

al

Gre

ece

Czech

Rep

Bulg

ari

aC

roatia

Hu

ng

ary

Pola

nd

Ro

man

iaR

uss

iaT

urk

ey

Arg

en

tin

aB

razi

lC

hile

Co

lom

bia

Mexic

oP

eru

Ch

ina

Ind

iaIn

don

esi

aM

ala

ysi

aP

hilip

pin

es

Thaila

nd

Household Debt 2013(% GDP)Source: BBVA Research and BIS

0.0

50.0

100.0

150.0

200.0

250.0

Un

ited

Sta

tes

Can

ada

Japan

Aust

ralia

Ko

rea

No

rway

Sw

ed

en

Denm

ark

Fin

lan

dU

KA

ust

ria

Fra

nce

Germ

an

yN

eth

erl

an

ds

Belg

ium

Italy

Sp

ain

Irela

nd

Port

ug

al

Gre

ece

Czech

Rep

Bulg

ari

aC

roatia

Hu

ng

ary

Pola

nd

Ro

man

iaR

uss

iaT

urk

ey

Arg

en

tin

aB

razi

lC

hile

Co

lom

bia

Mexic

oP

eru

Ch

ina

Ind

iaIn

don

esi

aM

ala

ysi

aP

hilip

pin

es

Thaila

nd

Corporate Sector Debt 2013(% GDP)Source: BBVA Research and BIS

Somehow justified by Stock vulnerability data Vulnerability &

Resilience

USJapanCanadaUKDenmarkNetherlandsGermanyFranceItalyBelgiumGreeceSpainIrelandPortugalIcelandTurkeyPolandCzech RepHungaryRomaniaRussiaBulgariaCroatiaMexicoBrazilChileColombiaArgentinaPeruUruguayChinaKoreaThailandIndiaIndonesiaMalaysiaPhilippinesHong KongS ingapore

…De-leveraging: Credit/GDP growth declining

Non Available

Booming: Credit/GDP growth is higher than 5%

Excess Credit Growth: Credit/GDP growth between 3%-5%

High Growth: Credit/GDP growth between 2%-3%

Mild Growth: Credit/GDP growth between 1%-2%

Stagnant: Credit/GDP is declining betwen 0%-1%

Weste

rn E

uro

pe

Euro

pe E

MLA

TA

MA

sia

20092002 2010 2011 2012 2013

G4

2003 2004 2005 2006 2007 20081997 1998 1999 2000 2001

US #

Japan #

Canada #

UK #

Denmark #

Netherlands #

Germany #

France #

Italy #

Belgium #

Greece #

Spain #

Ireland #

Portugal #

Iceland #

TurkeyPolandCzech RepHungaryRomaniaRussiaBulgariaCroatiaMexicoBrazilChile #

Colombia #

Argentina #

Peru #

Uruguay #

China #

Korea #

Thailand #

IndiaIndonesiaMalaysia #

PhilippinesHong Kong #

S ingapore #

De-Leveraging: House prices are declining Non Available Data

Booming: Real House prices growth higher than 8% Excess Growth: Real House Prices Growth between 5% and 8%High Growth: Real House Prices growth between 3%-5%Mild Growth: Real House prices growth between 1%-3%Stagnant: Real House Prices growth between 0% and 1%

Euro

pa

Occ

iden

tal

Euro

pa

Em

ergen

teLA

TA

MA

sia

20092002 2010 2011 2012 2013

G4

2003 2004 2005 2006 2007 20081997 1998 1999 2000 2001

Private credit colour map (1996-2013 Q2) (yearly change of private credit-to-GDP ratio) Source: BBVA Research and Haver

Credit Bubbles are not particularly relevant to worry in excess… but some incipient signs have been appearing

Real housing prices colour map (1996-2013 Q2) (yearly change of real housing prices) Source: BBVA Research, BIS and Globalpropertyguide


Besides, some important previous vulnerabilities are now lower (except for EM Europe)…

0

10

20

30

40

50

60

70

80

90

100

Latv

ia

Cro

atia

Lithuania

Georg

ia

Bulg

ari

a

B.H

erz

egovin

a

Rom

ania

Mace

donia

Mold

ova

Ukra

ine

Pola

nd

Turk

ey

Russ

ia

Cze

ch R

.

Uru

guay

Peru

Para

guay

Hondura

s

Chile

Bra

zil

Colo

mbia

Arg

entina

Sin

gapore

Hong K

ong

Indonesi

a

Kore

a

India

Emerging Markets: FX Loans 2012 (% Total Loans, 2012 or latest available data) Source: IMF


Which is the result of several years of reforms…

• Exchange rate flexibility

• Fiscal discipline and debt consolidation

• Central bank independence

• Lower price increases and inflation-targeting

• Banking supervision

• Better business environment

Policies and reforms after late 90s-early 00s crises


Increasing share in World Trade with South-South flows increasing. Diminishing influence of GATT but increasing bilateral agreements

Openness

& Trade

The share of EM in World Trade is increasing

Distribution of world exports (% of total exports) Source: WTO

Distribution of world Imports (% of total exports) Source: WTO

Openness & Trade

(10.2%) (0.7%)

(8.1%)

(3.2%)

(0.6%) (0.7%)

(0.8%)

(2.6%)

(7.8%)

(1.6%)

(0.9%)

(3.4%)

(3.6%)

(2.5%)

Declining Share

About Same Share

Increasing Share

And trade routes are changing

Share of Total Trade between Geographic regions in World Trade 2011 (1990 shares in brackets) Source: WTO and BBVA Research

Openness & Trade

Rapid growth in emerging countries increases South-South relations

North-North61%

South-South

6%

South-North16%

North

-South

17%

North-North40%

South-South 15%

South-North24%

North

-South

20

%

Read more at: “Asia-driven South-South trade intensifies specialization patterns in the rest of emerging regions” www.bbvaresearch.com/KETD/fbin/mult/EWSouthSouthTrade_i_tcm348-390302.pdf?ts=3082013

Distribution of world exports according to origin and destination (% of total exports) Source: BBVA Research and IMF/DOTS

1980s-1990s 2010-2012

South in 40% of transactions South in 60% of transactions

Openness & Trade

http://www.bbvaresearch.com/KETD/fbin/mult/EWSouthSouthTrade_i_tcm348-390302.pdf?ts=3082013







GATT loosing influence but Increasing bilateral agreements

The Asian Noodle (Trade agreements in Asian Countries) Source: BBVA Research and IMF/DOTS

Openness & Trade

Still far from Developed Economies

Institutional challenges remain to keep growth momentum

Institutions

EMs improvements have been limited and the gap is still wide relative to the G7

Governance Indicators 1996-2012 (average of six indicators) Source: BBVA Research and WB

Governance Indicators 1996-2012 (average of six indicators) Source: BBVA Research and WB

Institutions

-2,5

-2,0

-1,5

-1,0

-0,5

0,0

0,5

1,0

1,5

2,0

2,5

19

96

19

98

20

00

20

02

20

03

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

EAGLEs Nest G7

-0.6

-0.5

-0.4

-0.3

-0.2

-0.1

0.0

0.1

0.2

0.3

0.4

Colo

mbia

Ja

pan

Turk

ey

Kore

a

Mexic

o

Taiw

an

Indonesi

a

Pola

nd

Bra

zil

Chile

Peru

N

igeri

a

Fra

nce

R

uss

ia

Canada

Germ

any

Vie

tnam

C

hin

a

Mala

ysi

a

US

India

Bangla

desh

S.A

fric

a

UK

Phili

ppin

es

Italy

Pakis

tan

Egypt

Arg

entina

Thaila

nd

Institutions matter for capital attraction

FDI stock and institutional factors (FDI in % of GDP and institutional indicator as specified) Source: BBVA Research, UNCTAD, World Bank and CSP

Ease of Doing Business (ordinal ranking)

Governance (-2.5 to +2.5; inverted scale)

State fragility (0 to 25)

Institutions

0

10

20

30

40

50

60

70

80

0 20 40 60 80 100 120 140 160

FD

I Sto

ck a

s a %

of

GD

P (

20

10

)

Ease of Doing Business Rank (2012)

0

10

20

30

40

50

60

70

80

-1.6 -1.2 -0.8 -0.4 0.0 0.4 0.8 1.2 1.6

FD

I Sto

ck a

s a %

of

GD

P (

20

10

)

Governance (2010)

0

10

20

30

40

50

60

70

80

0 2 4 6 8 10 12 14 16 18

FD

I Sto

ck a

s a %

of

GD

P (

20

10

)

State fragility (2010)

Institutions matter for welfare

6

7

8

9

10

11

12

2,5 3,0 3,5 4,0 4,5 5,0 5,5 6,0

PP

P-a

dju

ste

d G

DP

pe

r c

ap

ita

Global Competitiveness Index (1-7)

Global competitiveness index and GDP per capita (PPP-adjusted) (GCI from 1 to 7 and GDP per capita in logs) Source: BBVA Research and World Economic Forum

Institutions

6

7

8

9

10

11

12

2.5 3.0 3.5 4.0 4.5 5.0 5.5 6.0

PPP- adju

sted G

DP p

er

capita

Global Competitiveness Index (1-7)

Thank you…

Emerging Trends in Developing Countries

Economy & Finance

Transcript of Emerging Trends in Developing Countries