Last updated September 12th, 2018.
The word “emerging market” brings to mind a country growing faster than most others. These economies are typically seeing strong population growth, greater foreign investment, and improved infrastructure.
All these things help emerging markets, well… emerge.
But not all emerging markets have robust economies. In fact, some are even weaker than developed nations such as Taiwan and Singapore.
Here are three emerging markets you should avoid. They’re all going through a phase of tepid growth and, for the time being, should be passed on by most investors.
Things can always change. But for right now, these emerging markets aren’t emerging.
Turkey had a rough few years. Once the darling of European investors, capital has now started to flee following political uncertainty. Recent elections at the beginning of 2017 which helped cement President Erdogan’s grip on power probably won’t help.
Its economy grew by 2.9% in 2016. This means Turkey is outpaced even by developed countries such as Ireland, New Zealand, and Sweden.
Much of the Turkish economy is reliant on tourism. But this sector has been hurt by Russia placing a ban on travel and everyone else staying away due to security concerns. It doesn’t seem like tourists will be flocking to Turkey anytime soon.
It’s now up to Erdogan to improve the nation’s economy. The problem is that there’s not much more he can do. Weak growth is set to continue through 2017 and beyond.
The military took control of Thailand in 2013 and economic growth has slowed since then. It grew by 2.9% in 2015 followed by 3.2% last year in 2016.
Foreign businesses, while not exactly scared off, are reluctant to pledge more capital. Annual floods and political uncertainty have concerned investors. The government’s recent feuding with Facebook and Google have unimpressed global tech giants.
In the most basic sense, the problem is that Thailand needs to be more competitive than it is. Places like Cambodia and the Vietnam have cheaper labor and lower costs. Malaysia and the Philippines boast better workforces.
Perhaps most importantly, an aging population will continue to pressure the Thai economy. Predictions show the number of working age Thais will decrease by 11% by 2040 – the fastest rate in ASEAN.
Thailand should step up its game if it doesn’t want to grow old before it becomes rich.
We’re going to step out of the Asian continent to look at perhaps the worst emerging market in the world. Rather than just growing at a weak pace, Brazil is one of few countries in the world now in recession.
Brazil’s GDP contracted at a rate of 3.8% in 2015 and again by 3.6% in 2016. Furthermore, it’s grown by less than 2% every year since 2010. This tepid if not negative growth makes the South American nation have one of the worst economies on the planet.
Political issues are a major cause (see the trend?) of Brazil being in a recession for the past two years. Every level of government, from the presidency to congress, has been marred by corruption scandals.
South America in general is slowing down. Everywhere from Mexico to Chile are seeing their economies grind to a halt.
This is yet another reason why Asia is a great place to invest. There’s countries like the Philippines and Cambodia which are actually growing quickly.
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