Emerging market (EM) economies are rebounding from an export malaise that has marred their fortunes since early 2012 and rendered several of them vulnerable to the tapering of US monetary stimulus.
So, is an EM export boom now once again in prospect?
The answer, say analysts, varies sharply according to which side of a stark dichotomy each emerging market falls. Manufacturing-led exporters, particularly in Asia, are riding a wave of resurgent demand from the US and Europe. But commodity-orientated exporters in Latin America and Africa are hurting from the slow expiration of the commodity supercycle. Read more
The nerdier parts of Washington DC have been riveted over the last week by a fight over one of the duller institutions in the city: the Exim Bank, the US’s export credit agency. The battle threatens the very existence, at least in its current form, of the agency that promotes US exports by insuring foreign buyers.
The battle is generally portrayed as a domestic ideological affair that pits true believers in unregulated markets (at least on this issue) against true believers in business. Yet the context inescapably includes other exporting economies, particularly in emerging markets. The stakes for the Exim Bank’s defenders have only been raised by the aggressive use of similar export credit agencies (ECAs) by emerging economies and most particularly China. It remains remarkable that the same US Congress that regularly inveighs against unfair Chinese export competition is also contemplating abolishing the agency that may help redress the balance.
Anyone reading about Bangladesh would be forgiven for thinking it’s a one-industry country. And when it comes to exports, they wouldn’t be far wrong. More than three quarters of Bangladesh’s exports are of ready-made garments. The anniversary of the Rana Plaza disaster, in which more than 1,100 people died, has focussed attention on the industry’s dangers. But what is being done to move the economy away from sweat shop factories? Read more
One of the few silver linings for countries that suffer a devaluation of their currency is that their exports can become more competitive.
South Africa – like other members of the so-called “fragile five” (Brazil, India, Indonesia and Turkey) – clung to the hope of an export rebound as the rand sank by 30 per cent over 2012 and 2013.
But, analysts say, exports have been frustratingly sluggish to pick up, raising questions over whether South Africa can sustainably reduce a current account deficit that stood at 5.1 per cent of GDP in the final quarter of 2013. (A large current account deficit, of course, is the main criteria for membership in the “fragile five” club). Read more
Emerging markets are redrawing the map of global trade in high-tech goods with several countries in developing Asia vaulting up the global rankings both in terms of exports of high-tech products and in R&D spending, a new HSBC research report finds.
Much of developing Asia’s ascendance is driven by China’s near six-fold increase in its total share of world exports of high-tech goods to 36.5 per cent in 2013 from a mere 6.5 per cent in 2000 (see chart), HSBC found. The US, by contrast, saw its share of total high-tech exports fall to 9.6 per cent from 29.2 per cent in the same period. Read more
When employees of Indonesian zinc oxide producer Indo Lysaght went to pick up their export permits from the trade ministry last month they were shocked to be told by officials: “computer says no”.
Without the company’s prior knowledge, zinc oxide had been added to the list of mineral ores that were banned from being exported as of January 12 as part of a controversial plan to force mining companies to build smelters and refineries. Read more
The recent devastation in Syria has had one less expected outcome far away on the shores of India.
Exports of cumin, a popular spice used in curry powder and medicines, have shot up to compensate for the disruption to supplies in the Middle East. But prices aren’t spiking as you might expect. Read more
Could Uruguay’s groundbreaking marijuana law lead to more than just legal spliffs? Politicians, government officials and legalisation activists all say: yes.
Producing marijuana legally to supply domestic recreational demand could be Uruguay’s first step to becoming a cannabis exporter and an R&D centre brimming with foreign investment. Read more
India’s trade data for the month of December was published on Friday, showing the trade deficit narrowed to $10bn from $18bn in the same month a year earlier.
That sounds like good news – but it’s not as good as a deficit of just $9bn in November – and it is possible that the gap will soon balloon as the government loosens its grip on gold imports. Read more
The 12th in our series of guest posts on the outlook for 2014 is by Saurabh Mukherjea and Ritika Mankar Mukherjee of Ambit Capital
In the stockbroking profession, the norm is to view a country through the lens of economic growth and political management. So a lot of effort is currently being expended on analysing when India’s economy will recover, who will win this year’s general elections and what the victorious candidate will do for the country. While such analysis is interesting to perform and sometimes stimulating to read, its ultimate impact on share prices is tenuous at best. Read more
India’s external balances have been a focal point this year as the country’s economic woes have centred around the depreciation of the rupee.
So policy makers will be pleased to see India’s trade deficit narrowing yet again. The gap was squeezed to $9.2bn in November from $17.2bn in the same period a year earlier, according to new data from the Ministry of Commerce and Industry. Good news? Read more
There's another side
Beyondbrics readers will be well aware of the threat that a tighter US monetary policy poses to emerging markets. Mere hints of higher rates and a tapering of bond-buying caused EM currencies to drop earlier in the year.
But there is another side to the coin, not often noted. Rates will only rise when the US economy recovers (that is, when unemployment dips below 7 per cent under the Fed’s current plans).
A sturdier US economy will help some EMs that export great volumes to the US, as well as hurt them – from higher rates. Read more
By Kim Hayward of BDO
The growth potential for medium sized businesses following international expansion is enormous. For many, the route may lie in emerging markets; yet although these markets play an increasingly large role in the global economy, just over 5 per cent of UK exports are to the Bric countries and the UK still exports more to Ireland than to China – and this is likely still to be the case in 2030. To unlock their potential, MSBs must capitalise on opportunities in emerging markets with a combination of strategy and opportunism. Read more
Taiwan’s exports slumped 7 per cent in September year-on-year, far worse than analysts had predicted. That’s the bad news.
The good news – and it’s a crumb of comfort – is that the electronic parts industry managed to squeeze into positive territory, with a smidgen of growth. Plus European demand is holding up. Those are the few positives. Read more
Philippine electronics exports, which account for almost half the country’s overseas sales, surged by a surprising 11.2 per cent from a year ago in July to $1.9bn, in what could be the start of a rebound from a plunge of almost a fifth in the first half of the year. Read more
India’s economic woes and the sharp decline in the value of the rupee are well known. But, the theory goes, as a currency depreciates, exporters stand to benefit.
Or do they? Is a fall in the rupee that much of a positive for India’s exporters? Read more
The Bank of Korea’s decision to leave interest rates unchanged at 2.5 per cent for a second month came as no surprise – instead, the focus was firmly on the central bank’s economic outlook.
The BoK raised its growth forecast for this year to 2.8 per cent from its previous 2.6 per cent and for next year to 4 per cent from its earlier 3.8 per cent. It’s a confident call. Is it too optimistic? Read more
Fresh from an election victory, Malaysian prime minister Najib Razak (pictured) was full of new-term enthusiasm when he visited the Financial Times this week, speaking of his plans to push his country into the ranks of the developed world by 2020.
He didn’t say it would be easy but it may be harder than he expects, given the slowdown in the world economy: trade figures published on Friday showed a 5.8 per cent drop exports in May, nearly double forecasts of around 3.0 per cent and April’s 3.3 per cent decline. Read more
Salman Khurshid, India’s foreign minister, is back from a trip to China last week, happy to see the end of a tense stand-off over a long-running border dispute. Settling that issue will re-open the way for a planned visit by Chinese Premier Li Keqiang to India and allow the two countries to concentrate on the big topic on Khurshid’s agenda: trade.
But here, too, relations between the region’s big powers are not entirely friendly. Read more
In the run up to this month’s trade data from South Africa, there were a couple of different theories doing the rounds.
One was that the deficit would get a lot worse, based on a the timing of holidays and the recent industrial unrest (hurting exports); the other was that the trade account would get a lot better, based on the weakening rand and a pick up of exports to China. The Bloomberg analysts consensus was for a slight improvement at R8.5bn ($945m) deficit.
Which was right? Read more