We at Templeton Emerging Markets Group believe high economic growth rates will remain a key attraction of many emerging markets in 2015. Even with major economies like Brazil and Russia slowing down, overall economic growth in emerging markets during 2015 is expected to be comfortably in excess of developed markets, with China and India likely to drive the Asian region to particularly strong growth.
Moreover, many emerging markets, among them China, India, Indonesia, Mexico and South Korea, have announced or embarked upon significant reform measures that differ in details but are generally aimed at sweeping away bureaucratic barriers to economic growth, encouraging entrepreneurship and exposing inefficient industries to market discipline. Most are also looking to rebalance economic activity away from export- and investment-heavy models to become more oriented toward consumer demand.
The Association of Southeast Asian Nations (ASEAN) economic community planned for 2015, which will bring 10 economically diverse Southeast Asian countries together into a single economic organization, represents another strand of reform in which more technologically advanced emerging economies are becoming increasingly interconnected with less-developed neighbors who possess resources of low-cost labor and commodities, to the potential benefit of both groups. The reform measures have had some short-term costs, but we believe that, should governments succeed in driving them through, longer-term benefits could soon begin to feed into economic growth figures. The emphasis on market discipline could also create a closer correspondence between emerging-market growth and corporate profitability.
We are enthusiastic about the potential of new technology to accelerate growth trends, with some Internet and mobile communications-based technologies in particular offering less-developed countries the opportunity to potentially leapfrog generations of economic change in more mature markets and move directly to efficient modern systems. (See chart on global smartphone sales below.) This factor could be a particularly dynamic driver of development in frontier markets that include much of Africa, which could give additional impetus to markets that already benefit from highly favorable demographics, abundant natural resources and low starting points in terms of existing per-capita gross domestic product.
