The writer is chair of Rockefeller International
In periods of gloom like this one, when commentators see nothing but faults in most countries, it is worth highlighting the few that defy the prevailing pessimism. Here are seven that stand out in a world tipping towards recession and higher inflation: Vietnam, Indonesia, India, Greece, Portugal, Saudi Arabia and Japan.
They share some combination of relatively strong growth, moderate inflation or strong stock market returns — compared with other countries. By fascinating coincidence, most of them also defy deep biases about the supposedly dim prospects of certain countries, cultures and systems.
The least surprising name on my list is Vietnam, a case study in communism that works. As geopolitical tensions increase with China, western businesses are hedging their bets by adopting a “China plus one” strategy — and often the “one” extra sourcing destination is Vietnam. By investing heavily in the infrastructure required of a manufacturing export power, and opening its doors, Vietnam is growing at nearly 7 per cent, the fastest pace in the world.
Criticism of the economic trials of Muslim countries long ignored the most populous one, Indonesia. Resource rich, it is benefiting from the global commodity price boom, but with a domestic market of 276mn it is not overly dependent on exports. It has unusually low debt compared with other developing economies, and an unusually stable currency in a year when most currencies are falling sharply against the dollar. The result, a benign mix of 5 per cent growth with less than 5 per cent inflation, makes Indonesia a shining example of economically adept Islam.
Though India’s growth is always flattered by its low base, its economy will continue to be one of the world’s fastest growing. Policymakers have done just enough reform to draw in investors who, spooked by the regulatory crackdowns in China, are now gravitating to the second largest emerging economy. New investment in digital services and manufacturing are bearing fruit and the vast domestic market insulates India from global recession.
Some of the “Pigs” — the countries at the core of the eurozone debt crisis a decade ago — are now in revival mode. Greece and Portugal have cut their government deficits by more than half, and are less exposed than most of Europe to gas supply shocks emanating from Russia.
Greece is getting a boost from a revival in foreign investment — and in tourism, which Covid had cut from 20 to 15 per cent of its gross domestic product. Less than 10 per cent of bank loans are non-performing, down from 50 per cent during the crisis. Now growing at more than 4 per cent, with inflation coming down fast, Greece is enjoying one of the region’s healthiest recoveries.
Portugal is in a similar place. It is wisely investing support funds from the EU and reforming one of the continent’s most excessively generous pension systems, while a special “golden visa” attracts a tide of rich new émigrés. Perhaps not coincidentally, the best performing stock market in the developed world this year is Lisbon’s. The Pigs acronym is passé.
Saudi Arabia is leading a movement among Gulf states to diversify beyond oil. Reforms, including loosening restrictions on women, workers, tourists and nightlife, have helped push projected growth to nearly 6 per cent over the next two years.
The regime is investing oil money in infrastructure, including 10 smart cities which promise a futuristic and car-free version of urban life. Though harshly criticised for political repression and with some distance to go on civil rights, the kingdom is also expanding economic freedoms and putting this petrostate at the forefront of green urban development.
The most surprising country on my list is Japan, where growth is actually picking up. After being dogged by deflation for years, Japan is also the rare country that gains from a return of inflation — now running just over 2 per cent. Its supposedly weak corporate culture has been raising profit margins. Labour costs are now lower in Japan than in China. The cheap yen is boosting exports and could revive animal spirits in the market as a late reopening from Covid restrictions draws back visitors.
Any of these economies could, of course, falter, undone by a turn in leadership, policy or by complacency. Still, these nations are already among the top performing stock markets this year. Amid well-founded worry about global prospects, a new set of winners is emerging.