Comment: Mint economies flavour new world order

THE volatility in emerging markets during 2013 has many North Atlantic commentators wondering if the wheels are coming off the wagon of those previously golden regions.

Martin Flanagan
Martin Flanagan

An unmistakeable recovery in the United States (and on Wall Street), and a deepening of the UK economic rebound, has some convinced 2014 will witness the developed world taking up the reins again.

By contrast, it has become fashionable for western stock-pickers to play devil’s advocate on the former sunny prospects for emerging markets.

But is much of this misguided, even wishful, thinking on the part of developed nations? Jim O’Neill, the former chief economist at Goldman Sachs, thinks so.

O’Neill’s words carry extra weight because he and his Goldman team famously predicted the rise of the Bric countries – Brazil, Russia, India and China – very early.

Not only does O’Neill think the Bric countries’ game-changing ascent has further to run, he agrees strongly with those who have defined a new wave of muscle-flexing emerging markets.

These are the so called Mint countries: Mexico, Indonesia, Nigeria and Turkey. The ex-Goldman guru says short-term volatility in some emerging markets, most notably China, is irrelevant to the tectonic shift of the centre of economic gravity away from America and Europe.

Although the Bric economies are almost certain to slacken their pace of growth from higher base rates, they are still adding their equivalent of a new Italy to their combined GDP each year.

And the Mint economies? O’Neill, who is presenting his upbeat views on emerging markets on BBC radio all this week, forecasts that, by 2050, Mexico, Indonesia, Nigeria and Turkey could account for 10 per cent of global economic growth. That’s close to the size of the eurozone.

They are not an homogeneous grouping, but share some characteristics such as favourable demographics and – in the case of Mexico, Indonesia and Turkey – stable inflation and sound public finances.

There are caveats. To varying degrees, there are serious issues with corruption and the rule of law in the Mint countries.

And a country is not viewed on the world stage, by other nations and financial investors, just on pure economic arithmetic.

There are the drug barons in Mexico while British industry executives often speak wryly about the challenges of doing business in Nigeria.

And, look at Turkey. On economic fundamentals, the European Union should be biting that country’s arm off when Recp Tayyip Erdogan’s administration tries to get entry to the EU club.

But the political crackdown on a largely secular, urban Turkish population from its Islamist leadership, plus rising suggestions of corruption and kickbacks, makes the prospect of the country’s adoption by the eurozone entry seem far off.

Political and social factors – including relatively poor levels of education in Indonesia and Nigeria – mean, as O’Neill convincingly contends, that the Mint economies’ progress won’t be without bumps in the road.

They are most likely to have spurts of growth mingled with intermittent political and economic setbacks. but that would merely mirror the experience of western developed nations and not stop the turn of the economic wheel. Despite hiccups like last year, the highway of global economic travel looks set in fresh emerging market tarmac.