From the 1980s to the fiscal downturn, emerging markets led by the BRIC countries — Brazil, Russia, India and China — produced record growth and became a change engine for the global economy. Even after 2009, emerging markets proved to be surprisingly resilient and were able to often maintain growth rates not seen even in more developed economies. However, economic problems in Brazil and Russia along with other factors now require a rethinking of the old BRIC paradigm. Evolving beyond their traditional role as commodity producers and sources of low-cost labor, today’s emerging markets play an increasingly greater role as a hub for high-end talent backed by younger demographics and a rapidly growing middle class.
Among the BRIC countries, Brazil and Russia have been struggling the most since 2010. Burdened with inflation and government controversies, Brazil is struggling through the longest recession in a hundred years. Its economy is shrinking at an alarming pace — analysts predict that the country will lose up to five years of real GDP growth by the end of this year.1 Annual growth is not expected to exceed 1 percent until 2020.2
As for Russia, a two-year plunge in crude prices has dealt a severe blow to the world’s biggest oil producer and second-biggest exporter. The country has seen the ruble reach historic lows, and the economy is expected to be limited to a 1 percent growth rate until at least the end of the decade.3
The new roster of today’s emerging market leaders includes a greater number of countries than in the past, with each country taking steps to increase its economic diversity, develop domestic markets, strengthen regional trading, and transition away from commodity exports. China and India remain in the lead, but now they are joined by the ASEAN-5 countries of Indonesia, Malaysia, the Philippines, Singapore and Thailand. Other emerging markets with strong performance and high-growth potential include Mexico, Central America, Myanmar, Vietnam, Bangladesh, Turkey and Ethiopia.4
At US$2.5 trillion, India’s economy is still not large enough to be considered a change driver for the region. However, the country’s GDP 7.4 percent exceeds that of China by a percentage point, making it a growth leader among emerging markets.5 Assuming current tends continue, the IMF estimates that India might retain its status of the fastest growing large economy until at least 2020.6
The traditional strengths of emerging markets will continue to fuel growth in emerging markets. At the same time, emerging markets are evolving away from commodity exports, working their way up the value chain toward higher-margin goods and services for both domestic and overseas consumers. Emerging markets are also becoming a source of increasingly sophisticated talent for innovation and advanced technology. Multinational companies, investors and business leaders need to keep in mind how quickly these markets are changing and develop business strategies that reflect the most recent developments and projected trends.
1The Emerging Economies That Will Shine in 2016, Forbes, 9 March 2016.
4Op. cit., The Emerging Economies That Will Shine in 2016.
6IMF expects India to retain world's fastest growing economy tag, Economic Times, October 2015.