Despite the global financial crisis, most emerging markets have continued to make progress since 2007 in their bid to escape the ‘middle income trap’, according to PwC’s new ESCAPE index.
The “middle income trap” occurs when a country's growth plateaus and eventually stagnates after reaching middle income levels.
Central and Eastern European countries such as Poland, Romania and Russia have shown remarkable improvements since 2000. The advanced economies as a whole have fallen back since the global financial crisis hit in 2007, with the notable exception of Australia.
“If we take a look at Romania’s economic development over a longer period of time, we see a remarkable evolution compared to the year 2000. But this is not a guarantee that our country will avoid the <middle income trap> and will make a steady transition to being a developed economy. We need a national project that will foster reindustrialization, attract foreign investments and help consolidate local capital in order to win the modernization wager”, stated Vasile Iuga, Country Managing Partner, PwC Romania.
Many northern European economies have also performed consistently well according to the index, including: Sweden (1st), Switzerland (2nd), the Netherlands (4th), Finland (5th) and Denmark (6th). Outside Europe, Singapore scores well (3rd) while Australia has moved up from 13th place in 2000 to 7th in 2012.
Malaysia has also performed well, moving up to 14th place in 2012 from 17th in 2007.
The US and UK have dropped down the rankings of advanced economies between 2007 and 2012 according to the index. But it’s the Eurozone crisis economies – Italy, Spain, Portugal and Greece – that have fallen the furthest since the crisis hit in 2007. Greece has now dropped to outside the top 30 countries that are listed in Table 2 below.
None of the four ‘MINT’ countries (Mexico, Indonesia, Nigeria and Turkey) have yet cracked the top 30, although all four have shown progress on the index since 2000.
“Previously buoyant emerging economies such as India, Brazil and Turkey have run into turbulence recently, showing the need for continuing structural reforms. To graduate to the advanced economy club, economic growth is necessary, but not sufficient. Governments and investors must take into consideration a wider range of development indicators, such as the ones that the PwC ESCAPE index captures”, added Vasile Iuga.
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