Emerging economies will continue growth surge

Emerging countries are expected to fare better than developed economies in 2011, says Garth de Klerk, CEO of Coface South Africa. De Klerk said the expectation for 2011 was a continued moderate slowdown in global economic growth with key role players such as the American economy, Japan, the Middle East and the Eurozone worth watching. “The winners in this crisis will be the emerging markets,” said De Klerk. “They will continue with solid growth in 2011 showing only a marginal slowdown: 5.6% compared to 6.9% in 2010. Contrary to the Eurozone, where the private debt bubble has resulted in multiple sovereign crises, activity in emerging countries is not being handicapped by private debt.” Advanced economies are only expected to show an average growth of 1.7% this year compared to 2.5% in 2010. But, said De Klerk, emerging countries are not immune to a surge in indebtedness in their private sectors and two types of profiles should be monitored in the coming months. “The first is the Polish- Brazilian profile,” he said. “In this environment companies have a tendency to go into debt because their local banks are reticent to lend, and domestic rates are high. This is leading to the risk of these countries creating more debt in foreign currency.” The second profile is described as Chinese-Vietnam and sees companies increasing their debt in local currency with their domestic banks that are often not in a position to accurately analyse the risks. Companies in this case scenario may have high debt that is not as transparent, which could increase the level of risk. De Klerk said while emerging countries have high and stable rates of activity and a strong financial base, he advised companies to continue to follow good credit management procedures in all business dealings as the market continued to recover.