Growing middle classes demanding better governance - Coface
Despite significant growth being forecast for emerging markets this year, challenges remained, particularly around societal changes, credit insurance solutions firm Coface Group chief economist Yves Zlotowski said.
“Society is changing and institutions need to adapt accordingly, but many governments are not addressing changing social needs,” he said, adding that the issues were amplified when citizens – particularly the middle class – actively voiced their opposition to challenges such as corruption and poor governance.
While governance remained a challenge for emerging markets, South Africa was said to have one of the highest ratings in government effectiveness in combating corruption – leading China, India, Mexico and Russia.
But the pace of reform, infrastructure deficiencies and governments’ inability to respond to middle class expectations could lead to further unrest in key emerging markets.
South Africa’s increasing youth unemployment, a lack of opportunities, social tensions and unrest in the labour market could stifle the country’s potential growth.
“A fully expanding middle class is more demanding in terms of law, anticorruption measures, freedom and transparency. Political institutions in emerging countries are being challenged to adapt to this new situation,” Zlotowski stressed.
While certain emerging markets, such as India, the Philippines, Indonesia, Thailand, Malaysia and Korea, besides others, were expected to deliver significant gross domestic product (GDP) growth, others, including Russia, Turkey, Romania, Ukraine, Croatia and Hungary would fail to produce GDP growth above 4%.
Coface estimated growth for sub-Saharan Africa to be between 4.4% and 5.2% in 2013. China was expected to boost its growth from 7.7% in 2012, to 8.5% in 2013, while India’s expected growth was expected to increase from 5.5% last year, to 6% this year. Russia’s GDP growth was expected to fall from 3.5% in 2012 to 3% in 2013.
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