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Emerging Markets Update: How are the CIVETS faring?


This entry was posted in 2014: a year to export, Emerging markets and tagged , , , , , , , . Bookmark the permalink.

Posted by DHL Express UK : Posted on September 25, 2014


Emerging Markets -CIVETS

Earlier this month, we took a closer look at the BRICs (Brazil, Russia, India and China) to see if these countries were fulfilling their promise of dominating the world economy by 2050. We determined that with the exception of China, the countries haven’t truly lived up to their potential – but that this isn’t necessarily bad news for British businesses looking to go global as the BRICs’ vast consumer markets will continue to offer tremendous potential for exporters.

So what about the CIVETS? Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa were first grouped together by the Economist Intelligence Unit as a ‘second tier of emerging markets’ in 2009. In 2010, former HSBC Group Chief Executive Michael Geoghegan further popularised the term by hailing the CIVETS countries as ‘a new group of emerging market dynamos’ on account of their large, young and growing populations, diverse and dynamic economies, and (comparative) political stability.

 

But while the CIVETS’ populations are still large, young and growing, their economies and political systems have undergone significant changes in the last four years – which, in turn, affects how attractive these countries are for British businesses looking to go global.

 

Colombia

Economics: Colombia’s GDP grew 4.3 per cent in 2014 Q2. Though this is lower than the predicted 6.5 per cent, the country is still the fastest-growing major economy in Latin America.

Politics: Colombia’s democratically elected governments have made strong headway in combatting corruption.

Outlook: If Colombia’s government remains stringent on combatting crime and terrorism and the economy grows further, more opportunities for British businesses looking to enter the market will emerge.

 

Indonesia

Economics: Though Southeast Asia’s largest economy posted a trade surplus in July 2014, economic growth reached a five-year low. According to the Wall Street Journal, Indonesia “remains fragile and exposed to sudden shifts in capital flows.”

Politics: Indonesia has strong systems in place to maintain the country’s democratic government, and volatility is generally low.

Outlook: Indonesia’s economy is predicted to grow 5.4 per cent in 2014, but needs to combat its budget deficit. Still, Nielsen estimates that Indonesia’s middle-income consumer base will more than double in size by 2020.

 

Vietnam

Economics: The country is continuing to move into high-tech and electronics; Microsoft, Samsung, and Intel are all making Vietnam a major player in their global manufacturing networks. The dong is stable, and the country’s GDP continues to grow.

Politics: Earlier this year, Forbes Magazine lauded Vietnam as a positive example of an emerging market due to a marked lack of political unrest combined with a strong economic performance.

Outlook: Vietnam has one of the most positive attitudes to global trade around the world and by 2020, the country’s consuming class will be 33 million strong. So if the country’s economic and political stability continue, Vietnam is in a position to become a key economic player.

 

Egypt

Economics: According to the World Bank, Egypt is one of the seven most vulnerable economies in the Middle East and North Africa (MENA) region. However, President al-Sisi, who won a landslide election in May 2014, has been given a ‘cautious thumbs-up by economists’ for his reform plans.

Politics: Egypt has had six governments since the ‘Arab Spring’ of 2011, but under al-Sisi’s government the situation is appearing to improve.

Outlook: Significant changes need to occur for Egypt to be considered a promising emerging market again. However, projects such as expanding the Suez Canal are projected to have a strong positive impact on Egypt’s trade potential.

 

Turkey

Economics: The country’s economy grew 4.7 per cent in Q1 2014 compared with Q1 2013. Q2 2014 growth, however, slowed to 2.1 per cent and unemployment is growing.

Politics: Turkey borders on Iraq and Syria, and the run-up to the national elections in August 2014 was turbulent.

Outlook: Turkey faces several economic challenges, including dependence on short-term flows to finance its deficit. However, the consuming classes are growing and Turkey’s growing labour market is in a good position to support future growth.

 

South Africa

Economics: Though 2014 Q2 growth was low for Africa’s second-largest economy, South Africa’s infrastructure continues to be the region’s most advanced – and sectors such as car manufacturing are going strong.

Politics: South Africa has established a strong record of democratic rule since the end of Apartheid, but there is some degree of uncertainty around the country’s political future.

Outlook: South Africa continues to offer a wide range of opportunities for British businesses. As DHL Express South Africa MD Hennie Heymans explains in his video interview with DHL Express UK CEO Phil Couchman, ‘Brand Britain’ is held in high regard and especially British SMEs have a unique chance at succeeding in this market.

 

 

Overall, the expectations for the CIVETS to become economic superstars were always lower than for the BRICs, and the acronym – strongly driven by the desire to come up with the ‘next BRICs’ – is comparatively forced. However, while none of the CIVETS economies are likely to dominate the 21st century, the countries’ comparatively high levels of internet penetration and young populations make them especially promising destinations for British businesses looking to tap into these markets through e-commerce: 46 to 51 per cent of the population in Colombia, Egypt, South Africa and Turkey had internet access as of 2013, and figures are continuing to rise – and even the 16 per cent of Indonesia’s population with internet access represent 40 million potential consumers.

If you want to find out more about trading with these markets, our Business Export Advisor team is here to help.

 

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