Shifting Eastward as CIVETS Join Rank of BRIC

Ten years ago, the term BRIC (Brazil, Russia, India and China) was used to refer to emerging markets with high growth potential. Recently, seven more countries, Vietnam among them, have been included in the rank of these emerging markets, and the group has been designated as CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa). According to HSBC, several main factors have contributed to these countries’ inclusion: a large, young, growing population, a diverse and dynamic economy, and relative political stability.

How has BRIC been performing?

Inclusion of CIVETS in the group of emerging markets is not a testament to eventual strong economic growth, as seen by the varying GDP growth rates in BRIC countries. According to the World Bank, BRIC countries had GDP growth of 3.7%, 6.9%, 7.1% and 10.1%, respectively, on an average annualized basis from 2000 to 2008. The general characteristics of CIVETS countries mentioned above are indications that strong economic growth may be achievable, but growth remains dependent on how policies are structured, such that policies that produce incentives for investors  to make investments in these countries instead of investing in more stabilized economies.

What is the expectation for Vietnam?

Vietnam has set a target GDP growth of 6.5% for 2010.  The Asian Development Bank and International Monetary Fund have generally affirmed Vietnam’s target through their estimates of 6.5% and 6.0% (though 6.5% is possible), respectively, while the World Bank forecasts that high income countries will grow by 1.8%. As the table below shows, Vietnam grew at a slower pace in 2009 compared to 2008, but the fall in growth from 2008 to 2009 is less drastic than from 2007 to 2008, which can imply a recovery in process. Furthermore, Vietnam’s growth rate is the highest among CIVETS countries and behind only to China among BRIC countries.

In the context of CIVETS and BRIC countries, Vietnam has been doing very well. However, as Vietnam strives for economic growth, it should be prudent in its policies so as to avoid the volatility exhibited by Russia’s performance in the last ten years. As we continue to monitor Vietnam’s progress, there will be a strong interest in how public policies shape growth for Vietnam as well as other CIVETS and BRIC countries over the next ten years.