Emerging markets offer highest growth opportunities despite challenges, volatility: Citibank

Nehal Samir
7 Min Read

Emerging markets continue to offer some of the highest percentage of growth  opportunities despite volatility and some challenges, according to Ebru Pakcan, Head of the EMEA Emerging Markets Region at Citibank. 

“In this part of the world we have also seen a lot of resilience as well as a lot of ability to bounce back, and to continue to actually offer that growth opportunity for many multinationals around the globe across various different sectors, we’re actually looking at more untapped markets, in terms of putting out goods and services and products,” she added.

Pakcan’s remarks came during an Emerging Markets Outlook Panel on the sidelines of the Citibank media summit, which is being held on Wednesday and Thursday.

Aside from Pakcan, the key speakers at the session are: Grant Carson, Cluster Head Turkey, Russia, Ukraine and Kazakhstan, EMEA Head Non-Presence Countries, EMEA Consumer Banking Franchise Head; Joyce-Ann Wainaina, Head of Global Subsidiaries Group-Sub Saharan Africa; and Rizwan Shaikh, Head of EMEA Emerging Markets Corporate Banking.

During her speech, Pakcan noted that the impact of the novel coronavirus (COVID-19) pandemic has been a global phenomenon, no single market around the world left unaffected by the impact.

“Each one of the markets has thought about the stimulus that needs to be pumped into the marketplace, many of these markets, have a lot of liquidity, just like what we see in US and Europe, supported by the central banks and the government’s trying to keep afloat,” she said, “The reality is, unfortunately, in some of these markets, at least the vaccination levels are still below what we are seeing in in the US or in parts of Asia or in Europe, which is going to continue to be a challenge for the markets.”

Pakcan continued that by looking beyond that, emerging markets continue to offer some of the highest percentage of growth opportunities despite volatility and some challenges.

She also noted that, in relation to COVID-19, many multinationals around the globe are rethinking their supply chain strategies. They are focused, instead, on resilience and on ESG themes, and as they do that, some supply chains are moving out of China.

While South Asian markets have benefited from the changes in supply chain, the opportunity for emerging markets in this part of the world to also benefit and actually position themselves for those supply chain shifts, should not be underestimated.

For his part, Shaikh highlighted the macro aspects that are impacting emerging markets. From a market perspective, these are the global recovery that is currently being seen.

“We’re seeing what we call a bit of a double boom as commodities are surging,” he added, “Global trade is recovering and combined with persistent low interest rates and supportive fiscal stimulus and developed markets is all positive for  emerging markets, and that is reflected in some of the market activity we’ve seen to date.”

Shaikh noted that the market should expect special-purpose acquisition companies (SPACs) to be making purchases and seeking opportunities in the emerging markets.

“I think we have already seen a few SPACs done in Russia, and we expect to see more activity outside of the Gulf Cooperation Council (GCC) in that space,” he noted, “So we do expect to see more of that in the coming months and quarters.”

Shaikh added that there is also the role that development financial institutions are playing in emerging markets to facilitate crowding in private capital for countries or clients which may not have access to commercial credit directly. In this context, trade plays a very essential role, particularly providing support during the peak of the crisis last year in terms of mobilising capital and facilitating trade flows.

In that context, he said Citibank is partnering with a lot of development finance institutions (DFIs) in emerging markets to facilitate that flow of capital to, to those who don’t have direct access.

For his part, Carson said that a lot of governments, particularly those that have based their economies around hydrocarbons, have realised that there is a significant need to diversify the economy and diversify urgently. This realisation has been accelerated by the novel coronavirus (COVID-19) pandemic.

This is alongside the acknowledgement that outdated and very manual policies, processes, and systems make countries vulnerable to disruption and sudden shock events similar to the current pandemic.

“What we’re starting to see now is that that’s accelerated the thinking around how to diversify your economy, how to digitally transform your economy, and your institutions, and how do you then align that with ESG initiatives,” Carson said.

Carson thinks that there is a real realisation that the diversification of the economy that comes with ESG is a good roadmap for countries to start to think how best to recover quickly from the pandemic and then reap the benefits of doing so.

For her part, Wainaina highlighted the events that have occurred in the last 18 months for multinationals. She stated that some have had a very good experience throughout the COVID-19 crisis, whilst others have been challenged.

She said that during this period, Africa has focused on areas such as healthcare communication and technology for obvious reasons. The entire continent is set to make a move into this digital universe.

There is major demand on the communication landscape, and governments have to ensure that they have better developed communication networks, Wainaina said. This included ensuring that there are appropriate technology, energy, and electricity capabilities.

“The areas that we have seen rapid growth on the multinational landscape have been especially this past few months on healthcare, and communication,” she said.

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