Four Arab countries – Qatar, Saudi Arabia, the UAE and Egypt – are among the world’s 25 Rapid Growth Markets (RGMs), which are expected to achieve an average of 6.2 per cent growth this year, a report said. Qatar had the highest nominal GDP per capita measured at purchasing power parity (PPP) in 2010 among the 25 RGMs, followed by the UAE. Qatar has also been the fastest growing economy over the last decade, with an average growth of 13 per cent, said Ernst & Young’s new quarterly Rapid Growth Markets Forecast (RGMF). The dynamics of the global economy have changed with a new set of fast-growing markets challenging the position of the established advanced economies.
The rapid growth markets (RGMs) are expected to grow collectively by 6.2 per cent this year, almost four times more than the anemic growth expected in the Eurozone, the report said.
In 2012 the RGMs are expected to grow by 5.9 per cent, compared with 1.6 per cent growth for the Eurozone this year falling to 0.6 per cent next year.
This forecast, which is co-produced with Oxford Economics and based on the Oxford Economics’ Global Econometric Model, is well placed to offer insight on macroeconomic trends across 25 RGMs which have been selected based on the size of the economy and population, strategic importance for business and proven strong growth and future potential.
The 25 RGMs will account for 38 per cent of world consumer spending and 55 per cent of world fixed capital investment, according to the forecast. By 2020, rapid growth markets will account for 50 per cent of global GDP when measured at purchasing power parity (PPP). Bassam Hage, Mena markets leader, Ernst & Young, said: “Rapid growth markets are becoming increasingly important in terms of both their overall weight in the world economy and their global influence. While the advanced economies struggle with weak growth, RGMs seem well-placed to better weather the economic storm.”
Over the past 10 years, Qatar has also been the fastest growing economy, with an average growth of 13 per cent per annum. Egypt’s average growth was at 4.9 per cent, the UAE at
4.3 per cent and Saudi Arabia achieved almost 3.2 per cent growth.
Altogether, the 25 RGMs have grown on average by 5.8 per cent per year over the last decade, more than three times as fast as the advanced economies combined and this rapid pace of expansion is set to continue, with growth in RGMs outpacing the advanced economies by more than 3.5 per cent per annum over the next decade, it said.
The forecast shows average GDP growth in the RGMs edging just under 6 per cent in 2012, with the American and Asian countries seeing the most marked slowing in growth. The outlook in the Middle East, however, is more positive with resource-rich countries such as Qatar, Saudi Arabia and the UAE benefiting from high oil prices.
Bassam added: “With the exception of Egypt’s slow recovering economy which is being weighed down by local developments, Qatar, Saudi Arabia and the UAE are expected to see continued strong growth in the future. Economic activity across the region has slowed in the past few years reflecting reduced economic confidence and greater caution. However, GCC government spending in areas such as infrastructure, healthcare and social policy is expected to drive further growth.”
FDI inflows to all RGMs have risen from $205 billion in 2000 to $444 billion in 2010, and they now receive around 50 per cent of global FDI inflows. Qatar, the UAE and Saudi Arabia were among the top five RGMs in terms of FDI inflows per capita in 2010. But FDI is no longer a one-way street — RGMs are themselves increasingly becoming major international investors in advanced economies, as their leading companies buy up international competitors.
Bassam added: “While the overall outlook for the RGMs is positive, one thing is certain: their progress will not be smooth. They have to deal with a number of challenges to ensure ongoing growth. The challenges include avoiding inflationary pressures arising from overheating; managing the impact of capital inflows on the competitiveness of their manufacturing industries and ensuring that their infrastructure (physical and human) is sufficient to support their long-term growth potential.”
Alexis Karklins-Marchay, co-leader of the Emerging Markets Center at Ernst & Young, said: “While the RGMs are far from decoupled from global economic risks, they are well positioned to deal with these challenges. In the case of a disorderly Eurozone debt crisis that leads to a prolonged recession in the Eurozone and a stagnation of growth in the US in 2012-13, RGM GDP growth could be cut to 3.2 per cent in 2013, much lower than the 6.8 per cent expected but still the envy of advanced economies.
“With fewer financial overhangs from the recent financial crisis, we would expect to see a reversal of the recent monetary policy tightening implemented in many countries. And, indeed, many could also raise government spending and cut taxes to support demand.” Optimistic outlook
The global economic outlook is very uncertain, with the risks of a renewed recession in advanced economies and widespread financial crisis growing. However, the RGMs are increasingly developing their own critical economic mass and most have the financial means, if necessary, to help support growth and protect their banking sectors from being significantly impacted.
Karklins-Marchay said: “While further deterioration of the economic situation would not be good news for the RGMs, such a scenario would, however, even further increase their weight in the global economy as the advanced economies decline. Moreover, we expect such a scenario to be a temporary speed bump on the path to increased prosperity in RGMs – slowing growth in the near term but not undermining the supply-side fundamentals that underpin the rapid growth we expect in RGMs over the next decade.”