International trade will drive world growth over the coming decade, and RGMs are set to play an ever more influential role.
Mature markets have been the source of recent shocks to the world economy. But the most serious risks appear to be receding. In the US, the failure to reach a deal on the size of the federal budget has led to deep cuts in government spending. However, stronger consumer confidence and rising wages suggest that private spending will pick up the slack and keep growth levels stable in the medium term. In Europe, the breakup of the Eurozone looks less likely. The continent’s growing sense of stability was tested in March, when the Cypriot debt crisis threatened to trigger another prolonged bout of turbulence, however markets remained calm and the major European economies proved to be fairly well insulated. Meanwhile, in Japan, fiscal stimulus and a weakened yen have boosted growth prospects.
The international environment is improving and risks to growth are receding
- Our economic forecasts are following the same trends as predicted three months ago. We expect growth in the RGMs to accelerate from 4.7% in 2012to 6.0% in 2014.
- There are, however, concerns. Recent exchange rate volatility has raised a discussion about so-called currency wars among advanced economies.
The world economy is now more globalized than ever and international trade will drive world growth over the next 10 years
- RGMs will play an increasing role in the world economy over the coming decade. Trade will grow between these markets, creating a wide range of new opportunities for them and advanced economies will also benefit, as exports to RGMs become a rising source of growth.
- The shipping industry will play a critical role in supporting the increase in trade.
As the RGM middle class expands, trade in services will rise sharply
• Wealthier populations in RGMs will demand more banking, insurance and other financial services.
• The largest contribution to growth in goods trade will come from the machinery and transport equipment sector.
Lower trade barriers will boost both intra-regional trade and cross regional trade, with Asia leading the way
• We expect mainland China's GDP to grow by 8.2% this year and 8.5% in2014. In Korea, the recovery has been more patchy. Southeast Asia has lowered many trade barriers in recent years, improving prospects for the region.
Mexico and Chile weathered the global downturn well, but Brazil continues to struggle
• Brazil’s recovery is still fragile, with growth falling short of 1% last year. However, we expect the economy to pick up as the year progresses. Mexico and Chile grew more strongly last year and both carry strong momentum into 2013.
• More manufacturing trade will provide new channels for growth in Latin America and help to protect the region from commodity price fluctuations.
Weak Eurozone demand continues to weigh on emerging Europe, but Turkey is strong and economic integration is boosting activity in Africa
• Middle Eastern countries are trading increasingly with other RGMs, reflecting the faster growth in RGM demand. Turkey is well set to make the most of its central location between Europe and Asia
