Discussion of the developing world often focuses on the big economies, playing up their challenges, real and perceived. Today, that means China's slowing growth and occasional debt worries, plus the damaging effects of low energy prices on oil-exporting countries like Brazil and Russia. This focus is understandable, but the media fixation may cause you to miss the broader picture. In that light, we present a roundup of recent growth reports you may have missed.[i] While challenges exist, on balance, the developing world's economic health is better than widely appreciated-and continues supporting global growth. Heck, even Greece grew! And beyond those nations pining for the days of triple-digit oil prices, the outlook is broadly positive.
Let's begin in Europe. The European Union's growth slightly slowed in Q2, (0.4% q/q versus Q1's 0.5%), but developing EU nations grew quicker. Frontier Markets Romania and Bulgaria, Slovakia, and Emerging Markets Poland and Hungary clustered at the top of Q2 growth rates, with 21 of 28 countries reporting so far. On balance, these five nations accelerated in Q2-with two flipping from slight contraction to expansion. After plunging furthest following the financial crisis, Eastern Europe's yearly growth rates have mostly surpassed the EU as a whole.Exhibit 1: Eastern Europe Leads EU Growth
Source: Eurostat, as of 8/23/2016. Real eurozone GDP (seasonally adjusted), Q1 2009 - Q2 2016.
Here's a look at what drove the most recent quarterly numbers:
In all five countries, construction and investment detracted in Q2, as a year-end 2015 deadline to use up EU aid money pulled spending forward. Nevertheless, all are growing. Oil's affordability helped: The five are importers-Hungarian and Bulgarian net energy imports accounted for 6% of GDP in 2014, when oil prices began to slide. Cheaper energy keeps inflation in check and sends real income higher. Consumers and businesses may save, spend or pay down debt with the windfall, but in any case they come out ahead.
The story is much the same in Emerging Asia:
In Latin America, home to more commodity-heavy economies than Asia or Europe, recent data were more mixed. Colombia has yet to report, while the other three Latin American EMs drifted a bit. Chile grew 1.5% y/y-beating 1.2% estimates, but slowing from Q1's 2.2%.[iii] Peru slowed from 4.4% y/y to a still-respectable 3.7%, with the slowdown underpinned by disruptions in Energy production.[iv] Mexico contracted slightly quarter-over-quarter, with Energy and Mining's well-known issues a primary culprit.[v] The trend, however, is growth: On a yearly basis, Mexican GDP grew 2.5%.
Now, individually, none of these nations are exactly huge economies. But combined they're a solid slice of world GDP-about 7.8%, according to 2015 World Bank figures. That would be the world's third-biggest economy, topping Japan, Germany and the UK. Together with positive growth in most other larger nations, they help form a backdrop of underappreciated global growth that supports rising stocks.
[i] As we're pretty sure you did, unless you make a habit of carefully tracking economic trends in the likes of Slovakia and Peru.
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*The content contained in this article represents only the opinions and viewpoints of the Fisher Investments editorial staff.