The exhaustion of a season of generalized economic growth in the "new markets" puts the theme - also, if not above all, for Made in Italy - of the selection of countries at the center of corporate strategies. A possible discriminant is represented by the space for economic policy to support demand in the short term and influence consumers' spending power
During the crisis, Italian companies focused more decisively on emerging markets, finding favorable conditions in the rapid expansion of a class of wealthy consumers oriented towards the purchase of medium-high range products to satisfy their needs for quality, fashion and design. The ties between Italian producers and new markets can consolidate even in this phase of lesser expansion of emerging areas, provided that companies are able to discriminate between the different economies. In this regard, a possible selection factor is represented by the space available to governments to support growth and consumption: monetary and fiscal policies can counteract the economic slowdown in the short term and, if accompanied by structural reforms, create the conditions for recovering a of sustainable growth in the medium term.
This challenge is more complex than in the past: in some important markets the margins for intervention have narrowed. If between 2001 and 2008 the combination of vigorous growth and prudent behavior in the fiscal sphere had favored an improvement in public finance fundamentals, today the situation is decidedly deteriorated (Figure 1). Monetary policy also suffers from less room for maneuver compared to the post-crisis years, especially in countries where the depreciation of national currencies, starting from the summer of 2013, has led inflation to exceed the central banks' target, with the effect of inducing them to keep reference rates at high levels (Figure 2).
To take into account the different situations within the emerging world, we have examined the positioning of thirty new markets[1] with respect to variables that can condition the direction of economic policy. In relation to monetary policy we have taken into consideration the inflation rate, credit to the private sector, the exchange rate regime, the size of external debt in foreign currency. For fiscal policy we referred to the budget balance and public debt (as a ratio of GDP), as well as a past fiscal performance indicator and a measure of sovereign debt risk.
Starting from this set of information, a cluster analysis made it possible to divide the economies analyzed into five homogeneous groups from the point of view of macroeconomic fundamentals (tab.1) and which, therefore, will probably be able to share similar economic policy orientations. The main discriminating element between the groups is represented by the exchange rate regime, since it affects the discretionary power of a country's monetary authority and affects the ability to absorb macroeconomic shocks.
The first cluster is formed by the new markets in which the margins for expansionary policies are greater, albeit with some distinctions. Among these, Poland, Hungary, the Philippines and Thailand benefited from the evolution of the commodity markets which pushed inflation to low (if not negative) levels and helped to contain public deficits. These conditions favor the maintenance of accommodating monetary policies, allowing room for intervention also for budgetary policies. For Asian economies, India in particular, the reformulation of subsidies and administered prices should allow for a reallocation of public spending in favor of investments in infrastructure, education, health and other social services.
Despite being attributed to the cluster with the best potential, Mexico, Turkey and South Africa show factors of structural weakness and macroeconomic imbalance which suggest caution in any easing of economic policy. The Turkish economy, in particular, remains vulnerable to high dependence on international short-term financing, albeit declining since 2014.
The second cluster includes relatively "virtuous" countries, i.e. with some leeway for economic policies, but which find a constraint in fixed or administered exchange rate regimes. Morocco and Tunisia in North Africa, Malaysia, Vietnam and China in Asia and the United Arab Emirates all share low inflation and, with the exception of the Emirates, a less critical public finance situation. There is no shortage of elements of fragility, linked to excessive credit growth, primarily in China, and to the stock of external debt, high in some cases (over 60% of GDP in Malaysia). For the Chinese authorities, however, the priority of economic policy remains the rebalancing of growth in favor of a greater weighting of consumption and services, rather than investments and industry.
The third cluster consists of countries with low external and public debt but with deteriorating budget balances due to falling oil revenues. For these oil exporters, there is no space for expansionary policies in the short term, while interesting opportunities could open up in the medium-long term thanks to the progress of structural reforms, aimed at reducing vulnerability to oil markets and strengthening the growth potential of non- oil. The fourth cluster includes countries with high macroeconomic imbalances, in which fiscal and monetary policies will remain oriented towards stabilization, also due to the need to recover credibility on international markets. Russia, Brazil, Ghana and Argentina are markets characterized by high inflationary pressures, if not out of control (as in the Argentine case), and with a public finance framework that further deteriorated in 2015. Furthermore, the composition of external debt shows a average high share of debt denominated in foreign currency – especially for Brazil and Russia – with risks for its sustainability in the hypothesis of new tensions on the currency markets.
Finally, the fifth cluster includes the three most vulnerable countries. Angola (specialized in the extractive sector), Egypt and Pakistan, net oil importers, share significant imbalances: persistent inflationary pressures (especially in Egypt and Angola), high public debts (with a peak of 90% of GDP in Egypt) and deteriorating. Macro conditions could improve in the medium to long term, especially if the necessary fiscal adjustment is accompanied by progress in economic and social reforms.
On the basis of the analysis developed, it is therefore possible to identify two groups of countries which, although within the limits imposed in some cases by macroeconomic imbalances, have more space for interventions to support consumers' spending capacity. Among the latter, some markets (in particular China, the Emirates, Mexico, Poland) present characteristics - in terms of growth of the wealthy class, demographic and cultural factors, consumption models - that are potentially favorable for the demand for Made in Italy products.
