Indonesia is no longer an after-thought on investor lists of fast-growing economies. According to BBVA projections, over the coming decade Indonesia will become the fifth largest contributor to global growth after China, the US, India and Brazil.
Moreover, Indonesia deserves a place alongside the BRIC economies, such as Russia, whose contribution to global growth over this period will be less than two-thirds the contribution of Indonesia’s. Even more astonishing is this achievement considering Indonesia’s modest starting point — in 2010 Indonesia’s GDP was less than half of Russia’s, adjusted for purchasing power parity (PPP).
To understand Indonesia’s true importance to global growth, therefore, one has to look beyond size and focus on dynamics. For this reason, Indonesia ranks high on BBVA’s list of EAGLEs, namely the world’s Emerging and Growth-Leading Economies.
The increasing importance of emerging markets in the global economic landscape is no longer a futuristic idea but a measurable fact. As a consequence, investors are realizing the importance of staying up to date on emerging market developments so as to find the best opportunities.
Given the sheer number of countries under the label “emerging market”, it seems necessary to narrow down the list to a number of key economies. Several groupings of countries have been coined so far, the most widely known being the BRICs. While path-breaking when coined, the BRIC concept seems outdated today given the growth differential among the four countries involved.
To offer a more objective and wider spectrum of key emerging markets for the years to come, BBVA has created a new grouping called EAGLEs which, as noted above, stands for “Emerging and Growth-Leading Economies”. Who are the EAGLEs? The list includes ten economies by order of relevance, namely China, India, Brazil, Indonesia, South Korea, Russia, Mexico, Egypt, Taiwan and Turkey.
The EAGLEs are expected to be responsible for half of all global growth in the next 10 years. That compares with just 14 percent for the G7. Remarkably, half of the EAGLE economies are from right here in Asia, the world’s fastest growing region.
In terms of the criterion for inclusion, each of these ten economies are expected to contribute more to global GDP growth than the average of the “G6” (the traditional G7 excluding the US).
The GDP of the non-BRIC EAGLE economies alone will be almost $4 trillion higher in 2020 than today, and will contribute to one-tenth of global growth over the next 10 years. That compares with $2.4 trillion and 6 percent, respectively, for the G6. In short, if investors want to search for new business opportunities, they need look no further than the EAGLEs.
Alicia Garcia-Herrero
Chief Economist for Emerging Markets
BBVA
Hong Kong
