Seeing Beyond the IMF’s News On Emerging Markets
(3BL Media/Justmeans) - The latest announcement by the International Monetary Fund (IMF) has made headlines, stating that emerging markets will create $1.6 trillion more value in goods and services than advanced markets this year! Advanced economies are, according to the IMF, the 34 nations that result from combining the members of the G7, euro area countries, and the four “newly industrialized Asian economies”—Taiwan, Hong Kong, Singapore and South Korea. The world’s 150 other nations are considered emerging or developing. This is the first time ever that emerging and developing markets has eclipsed the combined measure of advanced economies and has been big news. Advanced economies will have a Purchasing Price Parity (PPP)-adjusted GDP of $42.8 trillion in 2013, while that of emerging economies will be $44.4 trillion. GDP is the value of goods and services produced by a country in a year divided by the country’s population (However, there are several ways to calculate GDP, and they can produce wildly different results.)
It is worth remembering that the emerging economies have strength in numbers, as not only are there more emerging and developing nations but they also have a larger combined population. These emerging and developing economies trail far behind advanced economies in per-capita terms and are a mere $7,415, while the same measure for advanced nations totals $41,369.
However, the IMF’s news does not mean these developing countries now no longer need international aid, a view shared by Bill Gates, co-chairman of the Bill & Melinda Gates Foundation. He says that the way we measure growth in developing economies is not accurate enough, which is vital for international aid. He explains how we measure growth and improvements in people’s lives is traditionally based on per capita GDP, yet GDP may be an inaccurate indicator in the poorest countries. Therefore, we need to be careful to understand headlines like those of the IMF, as it is a concern for those organisations that wants to use statistics to make the case for helping the world’s poorest.
There are problems with poor countries’ GDP data, for example. Many countries in sub-Saharan Africa do not update their reporting often enough, and so their GDP numbers may miss large and fast-growing economic sectors, like mobile phones. A good example is Liberia, Sub-Saharan Africa’s second-poorest, seventh-poorest, or 22nd-poorest country in terms of GDP, depending on which authority you consult.
International organisations like the World Bank and donor governments need to do more to help developing countries produce clearer pictures of their economies. There needs to be more consistency about wanting better statistics and using them to make decisions. The better the tools we have for measuring progress, the more we can do to ensure that those investments reach the people who need them the most.
Photo Credit: Mike Licht, NotionsCapital.com