CIVETS to Take Over from BRICs as Emerging Markets Lead Global Recovery

Posted on 13 October 2010

“It’s a defining moment,” said HSBC CEO Michael Geoghegan. He was referring to the fact that emerging markets are expected to overtake their developed counterparts in purchasing power parity.

“Emerging markets will grow three times faster than developed countries this year and are driving global recovery,” he said.

“Within three years, for the first time, the economic firepower of emerging markets will overtake the developed world, measured by purchasing power parity.”

Leading the emerging market growth, Geoghegan highlighted the “CIVETS”, Columbia, Indonesia, Vietnam, Egypt, Turkey and South Africa, as likely to become the world’s fastest growing economies in the near future, following the BRICs (Brazil, Russia, India and China) as named by Goldman Sachs.

“Each has a very bright future,” he said. “Each has large, young, growing population. Each has a diverse and dynamic economy. And each, in relative terms, is politically stable.”

Geoghegan also pointed out that there is expected to be 1.2 million middle class people in emerging markets by 2030, up from just 250 million in 2000. This bodes well for growth in housing markets and financial sectors within those countries.

Geoghegan said that people tend to start opening savings accounts and other financial products when their income hits $10,000, but we have seen in the BRICs that rising affluence has a massive impact on housing markets. And in fact we are already seeing this in many new emerging markets; with Egypt recently making the headlines for its growing housing shortage, and Turkey‘s mortgage market growing rapidly.

We are also seeing reports of increasing internet and mobile phone usage across Turkey. This type of growth continues to breed further growth, and continues to increase Turkish imports, following the trend pointed out by Geoghegan of emerging markets in the recovery driving seat.

While developed countries are getting further into debt, countries like Turkey are continuing to pay down debt. Thus, they will continue to present themselves as the best investment bets, which will also fuel further growth as FDI increases.

The future is definitely bright for Turkey, the CIVETS and many other emerging markets across the Middle East, Asia and Latin America.

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