Best of the Week
Most Popular
1. Gold vs Cash in a Financial Crisis - Richard_Mills
2.Current Stock Market Rally Similarities To 1999 - Chris_Vermeulen
3.America See You On The Dark Side Of The Moon - Part2 - James_Quinn
4.Stock Market Trend Forecast Outlook for 2020 - Nadeem_Walayat
5.Who Said Stock Market Traders and Investor are Emotional Right Now? - Chris_Vermeulen
6.Gold Upswing and Lessons from Gold Tops - P_Radomski_CFA
7.Economic Tribulation is Coming, and Here is Why - Michael_Pento
8.What to Expect in Our Next Recession/Depression? - Raymond_Matison
9.The Fed Celebrates While Americans Drown in Financial Despair - John_Mauldin
10.Hi-yo Silver Away! - Richard_Mills
Last 7 days
Coronavirus is America's "Pearl Harbour" Moment, There Will be a Reckoning With China - 6th Apr 20
Coronavirus Crisis Exposes Consequences of Fed Policy: Americans Have No Savings - 6th Apr 20
The Stock Market Is Not a Magic Money Machine - 6th Apr 20
Gold Stocks Crash, V-Bounce! - 6th Apr 20
How Can Writing Business Essay Help You In Business Analytics Skills - 6th Apr 20
PAYPAL WARNING - Your Stimulus Funds Are at Risk of Being Frozen for 6 Months! - 5th Apr 20
Stocks Hanging By the Fingernails? - 5th Apr 20
US Federal Budget Deficits: To $30 Trillion and Beyond - 5th Apr 20
The Lucrative Profitability Of A Move To Negative Interest Rates - Pandemic Edition - 5th Apr 20
Visa Denials: How to avoid it and what to do if your Visa is denied? - 5th Apr 20 - Uday Tank
WARNING PAYPAL Making a Grab for US $1200 Stimulus Payments - 4th Apr 20
US COVID-19 Death Toll Higher Than China’s Now. Will Gold Rally? - 4th Apr 20
Concerned That Asia Could Blow A Hole In Future Economic Recovery - 4th Apr 20
Bracing for Europe’s Coronavirus Contractionand Debt Crisis - 4th Apr 20
Stocks: When Grass Looks Greener on the Other Side of the ... Pond - 3rd Apr 20
How the C-Factor Could Decimate 2020 Global Gold and Silver Production - 3rd Apr 20
US Between Scylla and Charybdis Covid-19 - 3rd Apr 20
Covid19 What's Your Risk of Death Analysis by Age, Gender, Comorbidities and BMI - 3rd Apr 20
US Coronavirus Infections & Deaths Trend Trajectory - How Bad Will it Get? - 2nd Apr 20
Silver Looks Bearish Short to Medium Term - 2nd Apr 20
Mickey Fulp: 'Never Let a Good Crisis Go to Waste' - 2nd Apr 20
Stock Market Selloff Structure Explained – Fibonacci On Deck - 2nd Apr 20
COVID-19 FINANCIAL LOCKDOWN: Can PAYPAL Be Trusted to Handle US $1200 Stimulus Payments? - 2nd Apr 20
Day in the Life of Coronavirus LOCKDOWN - Sheffield, UK - 2nd Apr 20
UK Coronavirus Infections and Deaths Trend Trajectory - Deviation Against Forecast - 1st Apr 20
Huge Unemployment Is Coming. Will It Push Gold Prices Up? - 1st Apr 20
Gold Powerful 2008 Lessons That Apply Today - 1st Apr 20
US Coronavirus Infections and Deaths Projections Trend Forecast - Video - 1st Apr 20
From Global Virus Acceleration to Global Debt Explosion - 1st Apr 20
UK Supermarkets Coronavirus Panic Buying Before Lock Down - Tesco Empty Shelves - 1st Apr 20
Gold From a Failed Breakout to a Failed Breakdown - 1st Apr 20
P FOR PANDEMIC - 1st Apr 20
The Past Stock Market Week Was More Important Than You May Understand - 31st Mar 20
Coronavirus - No, You Do Not Hear the Fat Lady Warming Up - 31st Mar 20
Life, Religions, Business, Globalization & Information Technology In The Post-Corona Pandemics Age - 31st Mar 20
Three Charts Every Stock Market Trader and Investor Must See - 31st Mar 20
Coronavirus Stocks Bear Market Trend Forecast - Video - 31st Mar 20
Coronavirus Dow Stocks Bear Market Into End April 2020 Trend Forecast - 31st Mar 20
Is it better to have a loan or credit card debt when applying for a mortgage? - 31st Mar 20
US and UK Coronavirus Trend Trajectories vs Bear Market and AI Stocks Sector - 30th Mar 20
Are Gold and Silver Mirroring 1999 to 2011 Again? - 30th Mar 20
Stock Market Next Cycle Low 7th April - 30th Mar 20
United States Coronavirus Infections and Deaths Trend Forecasts Into End April 2020 - 29th Mar 20
Some Positives in a Virus Wracked World - 29th Mar 20
Expert Tips to Save on Your Business’s Office Supply Purchases - 29th Mar 20
An Investment in Life - 29th Mar 20
Sheffield Coronavirus Pandemic Infections and Deaths Forecast - 29th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast - Video - 28th Mar 20
The Great Coronavirus Depression - Things Are Going to Change. Here’s What We Should Do - 28th Mar 20
One of the Biggest Stock Market Short Covering Rallies in History May Be Imminent - 28th Mar 20
The Fed, the Coronavirus and Investing - 28th Mar 20
Women’s Fashion Trends in the UK this 2020 - 28th Mar 20
The Last Minsky Financial Snowflake Has Fallen – What Now? - 28th Mar 20
UK Coronavirus Infections and Deaths Projections Trend Forecast Into End April 2020 - 28th Mar 20
DJIA Coronavirus Stock Market Technical Trend Analysis - 27th Mar 20
US and UK Case Fatality Rate Forecast for End April 2020 - 27th Mar 20
US Stock Market Upswing Meets Employment Data - 27th Mar 20
Will the Fed Going Nuclear Help the Economy and Gold? - 27th Mar 20
What you need to know about the impact of inflation - 27th Mar 20
CoronaVirus Herd Immunity, Flattening the Curve and Case Fatality Rate Analysis - 27th Mar 20
NHS Hospitals Before Coronavirus Tsunami Hits (Sheffield), STAY INDOORS FINAL WARNING! - 27th Mar 20
CoronaVirus Curve, Stock Market Crash, and Mortgage Massacre - 27th Mar 20
Finding an Expert Car Accident Lawyer - 27th Mar 20
We Are Facing a Depression, Not a Recession - 26th Mar 20
US Housing Real Estate Market Concern - 26th Mar 20
Covid-19 Pandemic Affecting Bitcoin - 26th Mar 20
Italy Coronavirus Case Fataility Rate and Infections Trend Analysis - 26th Mar 20
Why Is Online Gambling Becoming More Popular? - 26th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock Markets CRASH! - 26th Mar 20
CoronaVirus Herd Immunity and Flattening the Curve - 25th Mar 20
Coronavirus Lesson #1 for Investors: Beware Predictions of Stock Market Bottoms - 25th Mar 20
CoronaVirus Stock Market Trend Implications - 25th Mar 20
Pandemonium in Precious Metals Market as Fear Gives Way to Command Economy - 25th Mar 20
Pandemics and Gold - 25th Mar 20
UK Coronavirus Hotspots - Cities with Highest Risks of Getting Infected - 25th Mar 20
WARNING US Coronavirus Infections and Deaths Going Ballistic! - 24th Mar 20
Coronavirus Crisis - Weeks Where Decades Happen - 24th Mar 20
Industry Trends: Online Casinos & Online Slots Game Market Analysis - 24th Mar 20
Five Amazingly High-Tech Products Just on the Market that You Should Check Out - 24th Mar 20
UK Coronavirus WARNING - Infections Trend Trajectory Worse than Italy - 24th Mar 20
Rick Rule: 'A Different Phrase for Stocks Bear Market Is Sale' - 24th Mar 20
Stock Market Minor Cycle Bounce - 24th Mar 20
Gold’s century - While stocks dominated headlines, gold quietly performed - 24th Mar 20
Big Tech Is Now On The Offensive Against The Coronavirus - 24th Mar 20
Socialism at Its Finest after Fed’s Bazooka Fails - 24th Mar 20
Dark Pools of Capital Profiting from Coronavirus Stock and Financial Markets CRASH! - 23rd Mar 20
Will Trump’s Free Cash Help the Economy and Gold Market? - 23rd Mar 20
Coronavirus Clarifies Priorities - 23rd Mar 20
Could the Coronavirus Cause the Next ‘Arab Spring’? - 23rd Mar 20
Concerned About The US Real Estate Market? Us Too! - 23rd Mar 20
Gold Stocks Peak Bleak? - 22nd Mar 20

Market Oracle FREE Newsletter

Coronavirus-stocks-bear-market-2020-analysis

Egypt Crisis Driven by Population Growth Impact Other Emerging Markets to Similarly Suffer

Politics / Emerging Markets Feb 03, 2011 - 05:58 AM GMT

By: Money_Morning

Politics

Best Financial Markets Analysis ArticleMartin Hutchinson writes: Seven months ago, global investment bankers had anointed Egypt as the "next big thing" in the world of emerging-markets investing - naming it as one of the exciting "CIVETS" economies that every investor had to consider.

At that time, in a column here in Money Morning, I told you that I had my doubts, and said that "with an 82-year-old dictator and a radical Islamist movement, it doesn't look that attractive to me."


Given Egypt's uprising of the past two weeks, that call must look like it was quite prescient.

But here's a surprise: Egypt's brewing political troubles weren't the reason that I told you to steer clear of that economy. In fact, even with the escalating violence of the past couple of days, there's still another issue that remains Egypt's greatest challenge.

Investors should take heed. The challenge that faces Egypt is the same problem that plagues a number of the world's other emerging-market economies. That challenge will prompt us to question the long-term growth projections "experts" are throwing down for some of these other highly touted investment plays.

Numbers Game
When Egyptian President Hosni Mubarak on Tuesday announced that he would not seek re-election, observers expected the nine-day-old uprising to quickly tail off.

Instead, just the opposite occurred - especially in central Cairo, where CNN.com reported that "a mob-rule mentality was in sharp contrast to the jubilant mood of tens of thousands of anti-Mubarak protesters the day before."

Here's the thing. In the 30 years he's been in office - following the assassination of predecessor Anwar Sadat - President Mubarak has actually done a pretty competent job.

Egypt ranks 98th out of 178 countries on the Transparency International Corruption Perceptions Index. That's not wonderful, but it is equal to Mexico, is better than most of its neighbors and much better than Russia or Venezuela, for example.

Egypt also ranks 96th on the Heritage Foundation's closely watched Index of Economic Freedom, only nine places below Italy and 17 places above the much-admired "BRIC" country, Brazil.

One would have liked to see Egypt rank higher on both lists, but let's be honest: That country doesn't come from a region with a vast tradition of success in those areas.

Overall, President Mubarak has substantially liberalized the economy - especially from dozy socialism practiced under the country's longtime ruler Gamal Abdel Nasser. Yet living standards - which had declined substantially under King Farouk I (1936-52) and catastrophically under Nasser (1956-70) - have recovered only moderately under Mubarak.

At $6,200, Egypt's purchasing power parity gross domestic product (GDP) ranks 137th in the world. And Egypt may well be one of the few countries to have lower living standards than a century ago. For some context, consider this: In 1980, Egyptians were on average almost twice as rich as their counterparts in China; now they are less than half as rich.

The reason for Egypt's unfortunate impoverishment is a simple one. It's the real reason that I seven months ago told investors to steer clear of that country. And it - not the current political unrest - remains the real obstacle that will keep Egypt from becoming the kind of emerging market that we'll want to invest in.

In short, population growth - not politics - remains this CIVETS economy's biggest challenge.

The One Red Flag to Heed
At 2% annually, Egypt's population is growing too rapidly. And at 80 million people, Egypt's population is too big.

The country's fertile land is concentrated in a narrow strip near the Nile, with some broader fertility in the Nile River Delta region. There is little rainfall, so the population must live on the 3% of the land area that is irrigated. In 1911, the country's population was 11.8 million, so the fertile land area was ample. With inexorable population growth, it is thus not surprising that today's 80 million Egyptians suffer lower living standards than 1911's 11.8 million.

You can see the scale of the problem when you realize that at Mubarak's accession to power in 1981, Egypt's population was only 44 million. Just to maintain living standards, President Mubarak's government has had to double the number of houses, double the road and rail networks and more than double the country's irrigation capacity (because new settlements are generally built further from water).

And that's not all. Egypt's government has also had to double spending on security - both physical security, in terms of police and armed forces, and social security, in terms of education especially, as new Egyptians must be readied for the work force. Mubarak's government has managed to achieve growth of more than 5% annually most of the time, but the 2% population growth means that this translates to living-standard improvements of only 3%.

Economists worry about the effect of a very marginally declining population in Japan, as its population ages. Given modern levels of health, most of those problems can be addressed by delaying the retirement age. No such easy adjustment is possible for Egypt's problem; advancing the age at which young people enter the work force merely reduces their already inadequate levels of education and impoverishes the country further.

As prospective emerging-market investors, there's a very clear lesson to be learned from Egypt's woes. And that takeaway is this: Avoid - like the plague - all countries with annual population growth above about 1.5%.

Kenya (2.6% population growth rate), Iraq (2.5%) and Jordan (2.2%) are growing too fast to achieve success - even if, as is true for Jordan, they are generally well-managed and market-oriented.

Despite their slightly lower rates, countries such as Nigeria (2.0%), the Philippines (1.9%), Ghana (1.9%), and even Malaysia (1.6%) all have population growth rates that are still fast enough to pose a serious danger to their people's welfare and to outside investors' wealth.

Even Turkey (1.3%) has population growth rate high enough to be worrisome.

Heed the lessons of Egypt. And don't get taken in by hefty growth rates and gaudy monikers (such as CIVETS) if the population growth rates are warning you to stand clear.

[Editor's Note: Do you like a bargain?

So do we. And we've got a great one for you.

In fact, we believe that our "2011 Investor's Forecast" issue is a bargain at any price.

Right now, however, we're offering it at a 20% discount.

But here's the catch: You only have one more day to act.

Tomorrow (Friday) is the last day you can get this report, published by our monthly affiliate newsletter, The Money Map Report, at that discounted price.

If you are already anMMRsubscriber, you already have this issue in hand, and can access this report by clicking here and then using your password. That will provide MMR subscribers with access to our latest recommendations.

Money Morningreaders who are interested in finding out more about our forecast issue can do so by clicking here.

Look at it this way: When oil reaches our projected price of $150 a barrel and gasoline costs more than $5 a gallon, the economic pain experienced by most consumers will be intense.

But that run-up in price will also create some massive profit opportunities.

And we show you just what to do.

For more information on these and other profit plays available in the New Year, please click here.]

Source : http://moneymorning.com/2011/02/02/...

Money Morning/The Money Map Report

©2011 Monument Street Publishing. All Rights Reserved. Protected by copyright laws of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including on the world wide web), of content from this website, in whole or in part, is strictly prohibited without the express written permission of Monument Street Publishing. 105 West Monument Street, Baltimore MD 21201, Email: customerservice@moneymorning.com

Disclaimer: Nothing published by Money Morning should be considered personalized investment advice. Although our employees may answer your general customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by our employees to you should be deemed as personalized investent advice. We expressly forbid our writers from having a financial interest in any security recommended to our readers. All of our employees and agents must wait 24 hours after on-line publication, or 72 hours after the mailing of printed-only publication prior to following an initial recommendation. Any investments recommended by Money Morning should be made only after consulting with your investment advisor and only after reviewing the prospectus or financial statements of the company.

Money Morning Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules