Dr. Helga Jung: “The emerging markets will continue to outstrip the industrialized nations in terms of growth, with rates of around five percent.”
There are more and more reports speculating about the end of the economic miracle on the emerging markets. Is the growth market boom a thing of the past?
Jung: No. Although the future pace of growth will be unable to keep pace with the level seen in recent years, the growth story is still intact. The emerging markets will continue to outstrip the industrialized nations in terms of growth, with rates of around five percent.
Bauer: What is more, the slowdown in economic growth in individual countries and regions is caused by a whole number of different factors. China is aiming to achieve more balanced, sustainable growth that is driven more by private consumption than by exports and investment. This revamp of the growth model will take time and is not compatible with the high growth rates seen in the past. In India, by contrast, further growth is being hindered primarily by infrastructure problems and excessive red tape.
Will the emerging markets be able to regain their former strength?
Jung: We will have to say goodbye to the high growth rates we have become accustomed to over the last few years. In a large number of up-and-coming economies, we are currently witnessing a transition from very fast, investment-driven growth to somewhat slower, innovation-driven growth. This is not just a normal, but also a healthy development.
To what extent are rising wages slamming the brakes on further growth on the emerging markets?
Bauer: The main effect that rising wages are having is that the weightings attached to the individual emerging markets are shifting. In China, for example, wages have risen considerably in recent years. With the labor force shrinking due to the one-child policy and an increasing shortage of qualified employees, it is becoming easier to push through wage increases.
Jung: By contrast, Mexico is becoming more and more significant as a production location due to the fact that wages there have remained virtually constant at a low level over the past few years, as well as due to the country’s proximity to the US, a key sales market.
What other developments will we see on the emerging markets over the next few years?
Jung: The emerging markets will continue to deliver significant impetus for our business over the next 10 years. The right conditions are in place for further growth. The population in these countries is young and increasingly well-educated. The growing middle class will reinforce consumption with its purchasing power and thus ensure continued growth, more jobs and increased prosperity.
