Winners and Losers in the Global Growth Game
June 9, 2015 | IHSEstimated reading time: 2 minutes
The composition of global growth has changed fundamentally, away from emerging markets and in favor of developed economies, according to Nariman Behravesh, chief economist at IHS Inc. (NYSE: IHS), the leading global source of critical information and insight.
Speaking at the IHS Economic and Country Risk conference in Paris, Behravesh spoke of four trends behind the divergent performances of economies and sectors.
“Of the many cross-currents that have buffeted the world economy in recent years, four stand out as having had a major impact on the performance of key economies: debt and deleveraging, the plunge in the price of oil and other commodities, central banks moving in different directions, and a strong dollar,” Behravesh said.
Winners and losers of the ‘Great Divergence’
Not surprisingly, these four trends have had disparate effects within and across countries. “US consumers are among the biggest beneficiaries of the ‘Great Divergence’, thanks to sounder finances, lower interest rates, reduced oil prices and a stronger dollar,” Behravesh said.
Lower oil prices, interest rates that are at (or below) zero and weak currencies are helping both Europe and Japan. However, unlike US consumers, the purchasing power of European and Japanese households has been hurt by weaker currencies. The biggest drag on growth in these economies is high (and in many cases rising) levels of debt. The ratio of total debt-to-Gross Domestic Product (GDP) in Japan and many European economies is well above 250 percent of GDP. Germany, the United Kingdom and a few other Northern European countries are the only exceptions. The need to deal with the debt surge (especially government obligations) will continue to constrain both European and Japanese growth rates over the next decade. The surge in China’s debt is also a source of increasing risk and concern.
Other emerging markets: truly divergent
While emerging market debt is, on average, lower than that of the advanced economies and China, debt levels in some Asian economies (Malaysia, South Korea, Thailand and Vietnam) and in Central Europe (Hungary and Slovakia) have risen at a rapid pace in recent years. This could hurt their growth prospects.
For the moment, debt is less of a problem for economies such as India, Brazil, and Russia. A far more important factor in the divergent performance of these three economies is big drop in commodity prices. As an importer of oil and other raw materials, India is a big beneficiary. At the other extreme, as commodity exporters, Brazil and Russia (as well as other countries in Latin America, Central Asia, the Middle East, and Africa) are seeing much weaker growth or recessions.
Suggested Items
Punching Out: Acquiring a PCB/EMS Shop: Brownfield vs. Greenfield
03/27/2024 | Tom Kastner -- Column: Punching Out!We often get asked about establishing a new company (greenfield) rather than buying an existing PCB or EMS shop (brownfield). There are many criteria to consider. Many buyers want to grow through M&A, but they cannot find acquisition targets that fit their criteria. Perhaps they can find the right shop, or at least one that fits five out of 10 criteria, but they encounter obstacles, such as owners who do not want to sell, price expectations that are too high, or negotiations that are too difficult. Despite the interest in building new facilities, since 2000, few companies have gone the greenfield route. Here is a look at the pros and cons of buying vs. building.
Blackfox Ready for IPC APEX EXPO 2024
03/26/2024 | Andy Shaughnessy, I-Connect007Blackfox Training Institute offers IPC-certified training for a myriad of PCB assembly techniques and standard certifications. With many technologists beginning to eye retirement, this training is at a premium. I recently spoke with Jamie Noland, director of training and education for Blackfox, about the company’s latest educational efforts, and his plans for the upcoming IPC APEX EXPO, where Blackfox will be exhibiting.
Catching Up With Industry M&A Expert Tom Kastner of GP Ventures
02/21/2024 | Dan Beaulieu, D.B. Management GroupEvery year or so, I like to chat with my friend, M&A expert Tom Kastner of GP Ventures. I know he has been busy the past few years, so I was anxious to find out more about it. He is the one person I know who really has his finger on the pulse of the industry. Tom has always been a great source of information for me and the industry as a whole.
AT&S Opens First Plant in Malaysia
01/22/2024 | AT&SAT&S will officially open its first plant in Kulim, Malaysia, on 24 January 2024 and expects numerous guests from the world of politics and business on this occasion.
Fein-Lines: CES 2024—A Tech Gadget Lover’s Dream
01/17/2024 | Dan Feinberg -- Column: Fein-Lines“Open sesame” is a magical phrase in the story of "Ali Baba and the Forty Thieves" in Antoine Galland's version of One Thousand and One Nights. In the story, this phrase opens the mouth of a cave in which 40 thieves have hidden a treasure. Attending CES was like opening the mouth to a cave of treasures. As soon as the show floor opened, I quickly realized that the two days available to me were not nearly enough. There were truly many hidden treasures now being revealed.