Vietnam shows most potential in emerging markets

Vietnam is one of the fastest developing economies in the emerging markets, with a potential growth rate of almost 10% per year in real dollar terms, according to a new report from PricewaterhouseCoopers.

By 2050, the Vietnamese economy has the potential to reach around 70% the size of the UK economy, the report predicts.

The research reaches the conclusion that long-term prospects for China, India and other key emerging economies (Brazil, Mexico, Russia, Indonesia and Turkey) remain positive and the countries will grow significantly faster than OECD countries.

"The global centre of economic gravity is already shifting to China, India and other large emerging economies and our analysis suggests that this process has a lot further to run,” comments John Hawksworth, head of macroeconomics at PricewaterhouseCoopers.

The report suggests that China could overtake the US in 2025 to become the world's largest economy, and will continue to grow to around 130% of the size of the US by 2050.

India is also tipped to grow by almost 90% of the size of the US by 2050. Brazil is also likely to overtake Japan by 2050 to move into fourth place as the world's largest economy.

The report also highlights other economies that could be worth the attention of investors, taking into greater account the risk appetite of the investor. For instance, Nigeria is seen as a high-risk region, but has the long-term potential to overtake South Africa as the largest African economy by 2050.

Other high risk countries showing high growth potential are the Philippines, Egypt and Bangladesh.

However, Hawksworth qualifies the findings but saying that the rapid growth of the emerging economies will not inevitably result in the “demise” of OECD economies.

He remarks: “In fact it should prove to be a boost for them through growing income from exports and overseas investments, even as the OECD share of world GDP declines.
“But while the macroeconomic story should be 'win-win ', at the company level there are likely to be both winners and losers from the process of adjusting to this new world economic order.”

Potential winners are expected to be in the retail sector, and they will benefit from lower cost imports into OECD markets, as well having opportunity of setting up branches in the major emerging market powers.

China, for instance, is set to be the second largest consumer market in the world by 2020.
“But of course, retailers need to be savvy enough to identify the right business strategies and local partners for such overseas ventures. This has not always been the case for overseas investments by retailers in the past, particularly in culturally unfamiliar territories such as China or India,” Hawksworth adds.

However, the report pinpoints the losers as the mass market manufacturers which will lose out to Chinese competition, as well as competition from new low-cost producers in Vietnam.
Other possible losers include companies that are heavily dependent on commodities, given the upward pressure on commodity prices around the globe.