Twenty years ago, I was told that emerging market shares were like mining stocks. This sounded an unglamorous if not outright demeaning description for one of the greatest growth stories the world was yet to see. But as the fortunes of emerging markets subsequently rose and fell in tandem with commodities, this adage rang more and more true. Two decades of data demonstrate convincingly that, despite their perceived long-term growth attractions, the performance of emerging assets depends primarily on the business cycle.
Every cycle reaches an extreme on the way up and on the way down. Persistent trends create their own mythology and investment fashions. The massive distortion of the financial markets by developed-market central bank intervention caused the long under-performance of value globally. To buy cheap assets is seen as horribly outmoded. Emerging markets are, therefore, “cheap for a reason”. Read more
By Jon Harrison and Trey McArver of Trusted Sources
The prospects for structural economic reform in developing Asian nations is being significantly constrained by the problems political leaders are experiencing in implementing their agendas. Conversations over the past month with policymakers and analysts in China, India, Indonesia, the Philippines and Thailand have brought out common themes on the progress towards sustainable growth and structural improvement.
Governments across the region have had mixed success in boosting growth. All five countries have seen growth decline to levels below that of 2010. External factors have been a major driver of the economic slowdown but domestic conditions have played a part as well. China is slowing due to unavoidable economic rebalancing and is likely to remain a major drag on regional economies for at least the next two years. Read more
By James Chen, Clearly
From the latest UN data available, the Vision Impact Institute has estimated that there are 2.5bn people in the world who have poor vision, and no means of correcting it. That is not far short of the number of people who live in China, India and Japan, combined.
It is thought that nearly 80 per cent of these cases could be corrected by something as simple as a pair of glasses.
Poor vision is not a life-threatening condition; it falls into a non-urgent category, which puts it low on the priority scale for development funding, often failing to make the list for global health and economic targets. Read more
It is incredible to think that just over a century ago, malaria stretched from the Arctic Circle to the southern tips of Africa and South America. Since then, half the world’s countries have eliminated the disease, most in the past 70 years. Countries where malaria remains are making astonishing progress. More than 30 countries, primarily in Latin America, Southern Africa and Asia-Pacific, are working to eliminate it by going from low to no malaria transmission. More than 20 of these countries are on track to end transmission of the disease entirely by 2020, paving the way for the global eradication of malaria within a generation.
The single greatest threat to achieving a malaria-free world is a reduction in funding or political support before the job is done. All too often, malaria programmes are victims of their own success. Malaria-related deaths and illnesses decline, the problem becomes invisible and resources are shifted elsewhere. History shows us that when governments or donors cut funding or close down malaria programmes too soon, the disease comes roaring back. Read more
By Reda El Chaar, Access Power
As President Barack Obama embarks on Thursday on a farewell trip to the UK, thoughts are turning to how the outgoing leader’s legacy is likely to be remembered. To those like me who are engaged in bringing energy to developing nations, the answer is obvious. Mr Obama’s greatest legacy will be his visionary campaign to bring electricity to the people of Africa. Perhaps. Read more
The global drive to bring the world online, the so-called “connect the unconnected” movement, has gathered significant momentum in the last few years.
This is the result of an emerging consensus that access to the internet is a basic human right and an important tool of economic and social development, enshrined among the UN’s 2030 Sustainable Development Goals. Read more
If death and taxes are life’s only certainties, why do governments in developing countries struggle to collect enough tax?
Take Pakistan. Its tax-to-GDP ratio of 11.5 per cent is among the lowest in the world. The bulk of Pakistan’s tax revenues are collected from corporations, of which less than 30,000 are registered. Despite relatively similar policies and tax rates, Pakistan collects far less revenue than more developed countries. The UK for example has a 39 per cent tax-to-GDP ratio – about average for developed economies. Read more
Along with desert fighting in the sub-Saharan Sahel region against government forces, terror groups brimming with arms after Libya’s breakup have struck hotels in capital cities throughout the eight-country French West Africa Economic and Monetary Zone (WAEMU), a grouping with a common central bank and currency, the CFA Franc pegged to the euro.
Cote d’Ivoire beach resorts outside Abidjan were the latest targets, following assaults in Burkina Faso and Mali killing international aid workers and business executives. These countries are enmeshed in their own violent political conflicts, putting the priority on internal as well as external security. But their economic and financial agendas are also urgent and call for “strong resolve”, according to the International Monetary Fund’s March Article IV report. Read more
Last week the Stockholm International Peace Research Institute released its latest figures on world military expenditure, confirming that global defence spending is once again on the rise. Although a real terms increase of 1 per cent appears modest, underneath the headline figure lies a more striking trend: alongside dynamic economic growth in many emerging powers has come a massive expansion in military expenditure over the past decade.
The Brics have led the pack. China’s military spending increased by 169 per cent in the past decade, Russia’s by 112 per cent, India’s by 44 per cent, and Brazil’s by 43 per cent. But others in the G20 are investing at a similarly rapid pace. Saudi Arabia has increased its defence budget by an astonishing 125 per cent over the past decade, and now ranks third on the table of top spenders, despite resorting to international money markets to plug a growing budget deficit. Read more
From the horrifying scenes in Ivory Coast, Mali and Brussels to the tragic refugee crisis in Lebanon and on Europe’s borders, it is clear the world is at a crossroads. There are a growing number of conflicts becoming increasingly deadly and protracted. There are more displaced people than at any time since the Second World War, and more people than ever are in need of urgent disaster relief. Extremism is on the rise and the effects of climate change are contributing to new crises. Now, more than ever, the world needs a sustained, coordinated response to these challenges. And when necessity dictates, the international community can act. The Syria donor conference in London this year and the subsequent political momentum seen on the ground in Syria is proof enough. Read more
Today’s World Health Day campaign leaves no doubt as to what it’s all about – comic book heroes smashing through rock, encouraging everyone to stay super and ‘Beat Diabetes!’ The World Health Organisation’s strong branding has done a great job singling out diabetes as a disease that it is eminently possible to tackle and defeat.
It’s a simple message – some might argue, too simple. The focus on eradicating one disease can be misleading at best, dangerous at worst: if we don’t consider diabetes as part of a holistic approach to global health care, are we acting to divert scarce resources away from crucial strengthening of health systems? Read more
By James McCormack, Fitch
The strength of the US dollar is the single most important issue of the many facing emerging market (EM) economies. At the same time – and in some cases as a corollary of the dollar’s strength – they are struggling with lower commodity prices, increasing rates of inflation, heightened political and geopolitical risks, greater financial market volatility, large capital outflows and an extended period of weakness in global trade.
It is critical to consider nominal dollar incomes in assessing countries’ relative economic performance and prospects because the dollar continues to dominate the pricing of global commodities, the settlement of international trade, the extension of cross-border credit and the foreign reserve assets held by EM central banks. Although the international roles of several other currencies, including the Chinese renminbi, are expanding, there is no convincing evidence that the dollar’s supremacy is under any immediate threat. Read more
Poverty is sexist. When a girl lives in poverty, every aspect of her life will be harder than that of a boy. It’s a shocking fact that in 2016, half a billion women can’t read – twice the number of illiterate men. A hundred and fifty five countries still have laws that discriminate against women, and three quarters of adolescents contracting HIV in Africa are girls. And yet, evidence shows that when girls and women are invested in, everyone climbs out of poverty more quickly – including boys and men.
On International Women’s Day, the ONE Campaign’s Poverty is Sexist report underscores this reality. It includes a country index looking at where life is toughest for girls based on data for some the biggest opportunities and threats a girl may face in her life, such as economic opportunity, health, nutrition, education and political empowerment. Read more
This is the way the world ends
Not with a bang but a whimper.
T S Eliot, “The Hollow Men”, 1925.
Actually when it comes to globalisation, we are used to seeing things end with a bang. That’s what happened, almost literally, in 1914, with the start of the First World War. The onset of war made it impossible for central banks and governments to act as agents of international cooperation, and that suffocated the international flow of trade, finance and investment. And so the era of globalisation that had defined the pre-war world for decades came to a very abrupt end.
But can globalisation end with a whimper? Arguably that’s just what’s happening right now. Read more
The furore over allegations that Lech Walesa collaborated with Poland’s communist secret police in the 1970s shows that the past is ever present in the countries that once made up the Soviet bloc. Intelligence files, real or fabricated, have often been used to destroy political opponents or settle scores, while laws on lustration and ‘de-communisation’ have played an important role in the efforts of central and eastern European states to define their post-communist identities. Vladimir Putin has also been an active participant in these ‘history wars’, rehabilitating the symbols and personalities of the Soviet period to encourage patriotic sentiment at home and labelling countries that try to erase their Soviet legacies as inherently Russophobic.
Divergent attitudes to the past are likely to remain a potential flashpoint in relations with Russia, yet it is no longer clear that the efforts many of these countries devote to repudiating the communist era serve any useful purpose in promoting or consolidating political change. Most of them completed their democratic transitions years ago and the danger of a communist revival is now wholly non-existent. If there is an internal threat to the open, pluralistic, market-oriented societies that successfully emerged from the wreckage of the Soviet experiment, it comes from a different direction altogether. In particular, it comes from a populist, authoritarian right that wants to build an illiberal Europe of closed borders and closed minds. Read more
This International Women’s Day some 75m women and children are caught in humanitarian crises, according to the Women’s Refugee Commission. They include over half a million Syrian women who face giving birth away from home, families and health services; Nepali girls forced into marriage too young by families who can no longer support them after the earthquake; and over 300 women and girls fleeing violence in Burundi who need post-rape care.
Girls and women are the worst affected in today’s multiple humanitarian crises. Respecting their rights and needs should be at the centre of humanitarian action – yet a recent IDS report found that Gender Equality programming is too often a box-ticking exercise. The Global Humanitarian Assistance Report 2015 shows that the proportion of humanitarian programmes making a significant contribution to gender equality is falling – from 24 per cent in 2012, to 20 per cent in 2014. Read more
Our strategy team at Citi has been bearish on EM fixed income and FX for many quarters, on the back of the reversal of international capital that was triggered by a G3 attempt at decoupling from EM growth.
In 2013, the markets recognised the risk of growth divergence between the G3 (the US being the major driver, of course) and EMs. That led the US dollar into a 22 per cent appreciation on a trade-weighted basis from April 2013 to the end of 2015, and a marked deceleration in EM portfolio flows (most recently an estimated outflow of $240bn in 2015). Read more
Since 1991, the European Bank for Reconstruction and Development has been focused on building a robust private sector and market economy, two key conditions for transition and economic growth. The recent approval of the Bank’s first ever Gender Strategy will provide an enhanced platform to deepen and broaden our commitment to work alongside clients to build sustainable business environments that are conducive to growth. In particular, the EBRD has identified three specific areas of financing where it can most actively respond to the need to diversify, reach new markets and deliver better business, while also actively encouraging gender equality.
Firstly, supporting financial institutions throughout the EBRD region is a pillar of the Bank’s business. This makes it a natural place to launch the Bank’s approach towards promoting gender equality. The business case is clear: currently, there is a global gender credit gap estimated at $285bn and up to 70 per cent of women-led small and medium enterprises (SMEs) are underserved or unserved financially. The EBRD is committed to supporting our partner financial institutions in their efforts to specifically target financing to women entrepreneurs. Read more
Innovations in technology and financial services are enabling previously “unbanked” people in developing countries around the world to gain access to credit and financial services at an unprecedented velocity and scale. It’s no overstatement to call this new trend in financial inclusion a revolution.
What’s happening is exactly what socially responsible microfinance institutions like ours have been dreaming of for decades and, to be sure, we’re excited to be playing our own part in it. Read more
The global commodities rout from mid-2014 brought with it severe market volatility that reshaped the growth trajectories of most economies, especially commodity-dependent economies such as those in sub-Saharan Africa. Countries such as Zambia, Angola, Nigeria and Ghana have experienced the effects of this first hand.
In periods of heightened volatility, the response mechanism of central banks becomes a vital factor that either compounds or abates the problem. This point is exemplified by how the various central banks across sub-Saharan Africa have dealt with rapidly weakening currencies and the subsequent rise in inflation. The policy response adopted by central banks in Zambia and Ghana, for instance, has erred on the side of minimum direct intervention in currency markets. In contrast, Nigeria and Angola have applied a heavy hand in defending their currencies. The two approaches have resulted in the formation of two types of risks: volatility and ‘jump’ risk. Read more