International credit insurer Atradius has named India, Indonesia and Vietnam as promising emerging markets in Asia this year.
Atradius says in a report that these markets are promising for several factors which are:
- Domestically-driven growth – GDP growth fuelled primarily by private consumption and fixed investment as well as sufficient external buffers and a flexible exchange rate reduce the downside risk stemming from global volatility.
- Supportive policies – Stable political and institutional conditions are important. Opportunities are increasing in several countries where macroeconomic policymaking is improving.
- Favourable demographics – These markets generally have young and growing populations, marked by an expanding middle class. This boosts consumption and also increases demand for investment as well as imports.
Sector-wise, the report says that the agriculture and food sectors in Vietnam and Indonesia are expected to grow substantially in 2018, underpinned by large populations and growing middle classes. The food sector in Indonesia is forecast to grow between 7% and 8% this year, and demand for imports, particularly of fruits, dairy, eggs, wheat, soybean and sugar, is expected to remain high. Demand for dairy products is also high in Vietnam where fertiliser use is expected to pick up to support the higher agricultural production.
In addition, Vietnam is becoming an increasingly important market for automobile sales, including luxury cars, which manifests in higher car imports and higher foreign demand for car parts. With a lack of suppliers with a strong domestic presence, reliance on imports for automobile production is likely to remain high. The removal of tariffs on vehicle imports from ASEAN member states as well as the positive economic outlook is expected to drive growth of passenger vehicle sales in 2018.
Meanwhile, the Indonesian automotive sector is also supporting local demand for chemicals. Improving infrastructure is expected to increase investment in new manufacturing plants in Eastern Indonesia. In Vietnam chemical imports, particularly of raw material inputs and active ingredients, are forecast to enjoy about 10% compound annual growth over the coming decade.
The infrastructure sector is also promising. Population growth, urbanisation, and government policy drive opportunities in the infrastructure sector in several economies. In India, a heavy government push for roads, railways, defence, and power is increasing demand in the infrastructure sector.
The machinery sector of Indonesia is expected to grow between 5% and 7% this year, with government-led infrastructure and electricity development leading to increasing import demand by the construction sector. Growing investment in infrastructure development in Vietnam is also driving higher machinery and equipment imports there.
Atradius in its report also identifies Colombia, Costa Rica, the Czech Republic, Morocco, Panama and Senegal as promising emerging markets.
Stronger global trade, higher commodity prices, still benign external financing conditions and supportive domestic policies in some major markets have strengthened the recovery in emerging market economies (EMEs) in 2017. At the aggregate level, economic growth in EMEs accelerated from 3.6% in 2016 to 4.4% in 2017. The same trends are expected to strengthen growth further to 4.7% in 2018, says Atradius.