The author is Chairman of Rockefeller International
In bleak times like these, when commentators see nothing but flaws in most countries, it’s worth highlighting the few who defy the prevailing pessimism. Here are seven that stand out in a world heading towards recession and higher inflation: Vietnam, Indonesia, India, Greece, Portugal, Saudi Arabia and Japan.
They share a combination of relatively strong growth, moderate inflation, or strong stock market returns – compared to other countries. By an intriguing coincidence, most of them also defy deep prejudices about the supposedly bleak 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 with China mount, Western companies are hedging their bets by adopting a “China plus one” strategy – and often the “one” additional sourcing destination is Vietnam. By investing heavily in the infrastructure needed to be a manufacturing export power and opening its doors, Vietnam is growing at nearly 7 percent, the fastest pace in the world.
Criticism of the economic processes of Muslim countries has long ignored the most populous country, Indonesia. It is rich in resources and benefiting from the global boom in commodity prices, but with a domestic market of 276 million it is not overly dependent on exports. It has unusually low debt relative to other developing countries and an unusually stable currency in a year when most currencies have fallen sharply against the dollar. The result, a benevolent mix of 5 percent growth and less than 5 percent inflation, makes Indonesia a shining example of economically savvy Islam.
Although India’s growth is always flattered by its low base, its economy will continue to be one of the fastest growing in the world. Policymakers have enacted just enough reforms to attract investors who, spooked by regulatory action in China, are now moving to the second-largest emerging economy. New investments in digital services and manufacturing are bearing fruit, and the huge domestic market is protecting India from a global recession.
Some of the “pigs” — the countries that were at the heart of the eurozone debt crisis a decade ago — are now in recovery mode. Greece and Portugal have cut their public deficits by more than half and are less exposed than most of Europe to gas supply shocks from Russia.
Greece is getting a boost from a revival in foreign investment – and tourism, which Covid had cut from 20% to 15% of its gross domestic product. Less than 10 percent of bank loans are non-performing, down from 50 percent during the crisis. Greece is enjoying one of the healthiest recoveries in the region, with growth in excess of 4 percent and a rapid fall in inflation.
Portugal is in a similar place. It is wisely investing EU bailout money and reforming one of the continent’s most over-generous pension systems, while a special “golden visa” is attracting a flood of wealthy new emigrants. Perhaps not coincidentally, the best performing stock market in the developed world this year is that of Lisbon. The acronym Pigs is passé.
Saudi Arabia is leading a move among Gulf countries to diversify beyond oil. Reforms including easing restrictions on women, workers, tourists and nightlife have helped boost projected growth to nearly 6 percent over the next two years.
The regime invests oil money in infrastructure, including 10 smart cities that promise a futuristic and car-free version of urban life. Though the kingdom has been severely criticized for political repression and civil rights are some way off, the kingdom is also expanding economic freedoms, putting this petro-state at the forefront of green urban development.
The most surprising country on my list is Japan, where growth is actually picking up. After years of being plagued by deflation, Japan is also the rare country to benefit from a return in inflation – now at just over 2 percent. Its perceived weak corporate culture has boosted profit margins. Labor costs in Japan are now lower than in China. The cheap yen is boosting exports and could revive animal spirits in the market as a late reopening due to Covid restrictions draws visitors back.
Any of these economies could, of course, falter, be crushed by shifts in leadership, policy, or complacency. Nevertheless, these nations are already among the best-performing stock markets this year. Amid well-founded concerns about the global outlook, a new set of winners is emerging.