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Global Economic Watch


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  • IMF Releases Positive Economic Outlook Report on Asia and Pacific

    If uncertainty in Western developed economies has taught us anything this last decade, it is that the global economy depends on robust growth in Asia. So the latest projections from the IMF will be seen by many as welcome. Hitting these projections depends on Asia's policymakers staying on course. The IMF report suggests the risks are not as great as they were a year ago, but there are still clear risks: Risks to the outlook have become more balanced. Global growth has strengthened and overall global prospects have improved (especially in advanced economies). But Asia still faces new and old risks (geopolitical uncertainty, exit from unconventional monetary policy in the United States and low inflation in the euro area). The main external risk remains an unexpected or sharp tightening of global liquidity. Rapid movements in global interest rates could lead to further bouts of capital flow and asset price volatility. Pockets of high corporate leverage in some Asian economies could magnify the effects of higher interest rates and lower growth on balance sheets, and weaken domestic demand. Asia is also facing various risks emanating from within the region. Growth in China and Japan could also fall below expectations, with negative spillovers for the rest of the region. In China, a gradual slowdown as a result of reforms would be welcome as it would put growth on a more sustainable path. However, a sharp fall in growth—which remains a low risk—would adversely affect those regional trading partners that are most dependent on Chinese final demand. In Japan, Abenomics could be less effective than envisaged, resulting in lower inflation and weaker growth, with spillovers to economies that have strong trade and foreign direct investment linkages with Japan. Strong intra-regional trade integration, which is shown to have contributed to greater business cycle synchronization and spillovers over the years, could transmit geopolitically related disruptions along regional supply chains. Read the full report here .
  • Mercer Infographic: Hiring and Compensation in Asia Pacific

    Mercer recently polled human resource leaders for companies in the Asia Pacific region. What they found matches up with a lot of what we've been seeing in growth projections. In short, companies are planning on increased hiring and steady improvement in compensation. That's the good news. What some might read as bad news: that the rate of growth in hiring and salaries is not as high as it has been in recent years. Here is a look at some of the topline findings in the survey. For the full size graphic, click here .
  • Swiss Pay Remains the Best Pay

    If salary matters most to you, you will want to try to get a job in Switzerland. In Mercer 's latest International Geographic Salary Differentials , Switzerland dominates the rankings (of course, this report doesn't cover how expensive it is to live in Switzerland ). Some other interesting findings from the report include Venezuela as the place with the highest gains in salary over the last year. The full report is available for purchase, here . But here are some of the key findings (full size graphic available here ):
  • Location, Location, Location: Competitive Advantages for Companies Based in Emerging Markets

    At McKinsey Quarterly , Yuval Atsmon , Michael Kloss , and Sven Smit lay out the case for multinational companies to "start thinking more like emerging-market companies." There is significant growth potential, they point out, in the emerging middle classes in the BRIC nations and elsewhere. At the moment, that is allowing companies based in emerging markets like Brazil and China to grow at twice the rate of competitors based in developed economies. And they are better equipped to serve rising consumer classes in emerging economies beyond their own, as Atsmon, Kloss, and Smit write: Emerging-market companies generally serve the needs of fast-growing emerging middle classes around the world with lower-cost products. Developed-economy companies tend to rely more on brand recognition while targeting higher-margin segments, which are relatively smaller and thus less likely to move the needle on the companies’ overall growth rates. We found that across a number of product segments—such as soft drinks, telecoms services, and mobile phones—emerging-market companies’ price points were 10 to 60 percent below those of developed-market counterparts. Even in business segments such as construction equipment, emerging-market players offered more products at lower prices. Consistent with that growth model has been the focus of many emerging-market players on R&D investments aimed at lower-cost products that fit developing-market conditions (and sometimes fuel “reverse innovation,” which can make a dent in developed markets). That’s still the case, and in aggregate, emerging-market companies still file significantly fewer patents than their developed-market counterparts. But they are starting to catch up (Exhibit 3), and a few innovation leaders are emerging, such as Chinese manufacturer Huawei, which was among the world’s top five companies in terms of international patents filed from 2008 to 2010. Huawei had 51,000 R&D employees in 2010, representing a stunning 46 percent of its total headcount, and placed them in 20 research institutes in countries such as Germany, India, Russia, Sweden, and the United States. Efforts such as these could boost the intensity of global competition. Before you make the mistake we initially did, and assume that the faster growth rate of companies headquartered in emerging in economies was due to those companies being smaller and having more room to grow, read Parsing the growth advantage of emerging-market companies here .
  • The Challenges of a Rising Global Middle Class

    One of the great positive global economic stories of the young 21st century--perhaps the top story--is the rapidly rising middle class in developing nations across the globe, especially in South America and Asia. But Johannes Jütting ,Head of Poverty Reduction at the OECD Development Center in Paris, warns us not to overlook the challenges that a burgeoning new middle class bring to nations and the global economy. Writing at Project Syndicate , Jütting argues that the middle class's "dreams" can become "nightmares" if policymakers get complacent and overlook the structural challenges that they must face: In today’s shifting world, with GDP in roughly 80 developing economies rising at twice the rate of per capita growth in the OECD, the club of the world’s richest countries, middle-class citizens paradoxically complain and protest regardless of whether fortunes improve or decline. Moises Naim, a former Venezuelan minister of trade and industry, even warns of a possible “emerging global war of the middle-classes.” While anger over pay cuts and unemployment make sense, it is harder to understand the current protests in fast-growing countries like Thailand and Chile, where standards of living are improving. What is going on? High growth in Asian and southern countries has meant greater export earnings and rents from natural resources. Unfortunately, this blessing can turn into a curse. In China, former Communist leader Deng Xiaoping’s vision – “let some people get rich first” – has led to impressive economic growth and poverty reduction; but it has also undermined the self-proclaimed “harmonious society,” as recent protests and labor conflicts indicate. Indeed, it is telling that, in the spring of 2011, Beijing’s municipal authorities banned all outdoor luxury-goods advertisements on the grounds that they might contribute to a “politically unhealthy environment.” Rising inequality, lack of civic participation, political apathy, and a dearth of good jobs, particularly for the young, comprise the Achilles heel of emerging-market countries’ current development model. A Gallup poll on subjective well-being in Tunisia and Thailand shows that, while income levels and social conditions in both countries improved between 2006 and 2010, life satisfaction dropped. Read The Middle Class Goes Global here .
  • Viet Nam's Potential as a Key Global Tech Sector

    EBay's latest Asian pursuit has global tech analysts watching Viet Nam. After trying and failing to enter the Chinese market, eBay has acquired a stake in Peacesoft , a Vietnamese e-commerce company. Forbes contributor Rebecca Fannin says this new venture presents an interesting case study for the potential of the Viet Nam as "the next frontier in Asia for tech investment." She cautions us not to expect Viet Nam's tech market to be on par with China or Silicon Valley, but it could still be a key spot: How this new eBay of Vietnam fares could impact many business models that have been adopted from the U.S. and China and are being tried in Vietnam now. There’s an Amazon and Dangdang of Vietnam – that’s VinaBooks. There’s a Google and Baidu of Vietnam – that’s Socbay. In Forbes, I wrote about how its risk-taking founder Nguyen Xuan Tai even turned down an acquisition offer from the Mountain View-based search giant back in 2006 and now owns the mobile search market in Vietnam – way ahead of Google. You can bet that Vietnam now has multiple GroupOns as well. The lead one is, invested in by GroupOn cloner Rebate Networks from Berlin and IDG Ventures Vietnam. China’s social networking giant Tencent has a copy too – Zing from an upstart in Saigon, VNG, which I wrote about in Forbes Asia. Tellingly, Tencent invested in VNG and its former M&A director Johnny Shen joined the Vietnamese upstart in 2008 as chief financial officer and executive vice president of business development and strategy. Vietnam’s talented and entrepreneurial software whizzes are the draw. But make no mistake –the market’s ecosystem for tech venture is no match for Silicon Valley or China’s own innovation hotspots. This nation of 89 million people has a relatively low 27 million Internet users but does rank up there with 66 million mobile phone subscribers, with newly launched third-generation mobile service beginning to take off. Read eBay Tries Vietnam After China Bust here .
  • Viet Nam Ranks Atop Global Business Optimism Survey

    Viet Nam's GDP grew 5.3% last year. And the government is projecting 7% growth this year. Given the strains of the slow global economic recovery, this is a growth rate that most economies would welcome. And so it is not surprising that Viet Nam's business leaders are highly optimistic. According to a recent survey by Grant Thornton , 92% of Viet Nam's businesses are anticipating profits for 2010. That is the highest rate of any country in the survey. Business Week 's Vanessa Wong reports on the survey: The report was based on surveys of 7,400 managers of medium-to-large privately held companies in a broad range of sectors—mainly cleantech, food and beverage, construction and real estate, hospitality, transport, manufacturing, retail, financial services, health care, and technology—in 36 countries to gauge which holds the greatest upside potential for 2010. Vietnam scored highest in three forward-looking growth categories: employment, revenue, and profitability. Further categories included overall optimism (Chile ranked No. 1, with Vietnam fourth) as well as exports and research and development. Of 150 companies surveyed by Grant Thornton in Vietnam, 95% expect higher revenues and 92% say profits will increase in 2010. The global average was 54% and 47%, respectively. A new survey by HSBC of small-to-midsized enterprises also puts Vietnam on top for business confidence in Asia. Ken Atkinson, managing partner at Grant Thornton Vietnam in Ho Chi Minh City, says: "People are pretty optimistic about this year." Citing new roads and power plants under construction, Atkinson has noticed in recent months an increase in due diligence in mergers and acquisitions. "I expect more companies will be working at full capacity [this year] than previously." Read the full article here . And take a look at Business Week's Best Profit Outlook slide show, with some good country-specific detail, here . Details on the Grant Thornton survey are available here .