Structural change in emerging markets: 4 key forces to understand


2019/06/13 16:20

Key points


We believe:


  • Economic development is generating four forces of structural change across emerging markets (EMs): greater inclusiveness, enhanced productivity, improved living standards and better sustainability.
  • 经济发展正在新兴市场产生四股结构性变革力量:包容性增强、生产率提高、生活水平提高和可持续性增强。
  • Countries that make progress towards economic development offer more fertile environments for investing.
  • 在经济发展方面取得进展的国家为投资提供了更肥沃的环境。
  • Traditional EM indexes are underexposed to the forces of structural change.
  • 传统的新兴市场指数受结构性变化的影响不足。
  • An unconstrained, thematic approach can offer targeted access to development opportunities.
  • 一种不受限制的主题方法可以提供有针对性的发展机会。

THE TAILWIND OF ABOVE-TREND GROWTH SHAPED THE EM INVESTMENT ENVIRONMENT OVER THE PAST 20 YEARS.This growth advantage has begun to fade; we suspect it will not return to the same extent in the near future. Instead, a change in policy priorities, together with an environment of slower but steadier growth, is creating different investment opportunities from those that characterised the last cycle. Our research agenda is focused on trying to understand this transition and its investment implications. This paper isolates four key forces of structural change across EMs, and offers a framework for translating these structural changes into potentially attractive investment themes.


Focus on development rather than growt


Policy objectives across EMs have been evolving away from a narrow focus on growth, towards broader measures of economic prosperity. “Growth at all costs” without due regard for its impact or stability is no longer an accepted approach to economic planning. This evolution should challenge how investors think about EMs. Specifically, we believe that “economic development” is replacing “economic growth” as the dominant force for structural change, and that it will likely be a powerful lens to use when searching for attractive investment opportunities in the future. Economic development is a broader measure than economic growth, as it takes into account a range of variables and higher-value-added outcomes within an economy. These outcomes allow new industries and services to grow, foster cooperation between the public sector and private enterprises, and broaden societal participation in economic prosperity, all without being detrimental to future generations.


In the short to medium term, economic growth without significant economic development is possible. However, over the long term, we find these examples frequently revert to weak and unstable growth patterns once the benefits of increases in the factors of production are realised.


What matters most: sustainable economic progress


Markets are often quick to respond to the ups and downs of cyclical news flow. For example, the potential impacts of oil prices on EM exporters and importers can result in short-term dislocations. On the other hand, markets are often slow to recognise structural change. We prefer to focus on these underappreciated and more enduring changes, rather than being distracted by the…


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