Undervalued economies — the wisdom of Alex

by on August 20, 2005 at 5:01 pm in Economics | Permalink

In January Alex wrote: "My own pick for undervalued nation was Germany…"

This week’s (August 20-26) cover in The Economist: Germany’s Surprising Economy 

Here is just one bit:

Thanks to the intense pressure that they have been under in the past few years,  Germany’s big companies have restructured and cut their bloated cost base. This process has for once been helped by the trade unions, which had been a stubborn obstacle to change. German workers have belatedly recognised that change has become essential, which is why they have been ready over the past year or so to accept such innovations as more decentralised pay bargaining, longer hours and even wage cuts. Thanks in part to this new flexibility, unit labour costs, a benchmark of competitiveness, have fallen sharply relative to other countries. In the past five years, Germany, long the most costly place in Europe in which to do business, has won a new competitive edge over France, Italy, the Netherlands and even Britain. That is a big reason why, last year, it regained its position as the world’s biggest exporter.

So what today looks like the most undervalued economy?  Can the lovely Croatia go so wrong?  Has everyone capitalized the commodities-driven recovery of Argentina?  Is it well understood how prepared Singapore is to complement the growth of China?  Aren’t Arab stock markets booming?  Comments are open…

Will Franklin August 20, 2005 at 10:45 pm

I concur on Croatia, but that’s just because I’ve enjoyed visiting there more than anything else.

RobHayward August 21, 2005 at 3:24 am

Very good call on Germany – How about somewhere in Africa for the next surprise – Uganda? I don’t know enough of the details of individual countries. However, the continent as a whole does seem to have so much potential and some relatively simple problems that can be fixed(some larger ones too of course – but they are what make it cheap). It has the world’s attention and has been very under-rated in recent years -as Germany was in the recent past. Get some free trade in agricultural goods and maybe we can have a more positive outlook.

aaron August 21, 2005 at 10:58 am

I visited Zagreb briefly back in Jan 2002, there was something about the people that told me Croatia would be growing a strong economy.

Peter August 21, 2005 at 9:11 pm

If it can get its act together, admittedly a huge “if,” I could foresee the Palestinian Authority becoming a strong economy, if not precisely a powerhouse. There’s a strong entrepreneurial drive in its population, and a prosperous, natural training partner in Israel.

Pavel August 22, 2005 at 4:26 am

I’d strongly differentiate the terms “undervalued economy” and “undervalued stock market”. Stock market, i.e.m big corporations, can prosper even in the environment of stagnating GDP. Similarly, stock may fall despite fast economic growth, as can be seen in China.

German macro is lousy, and will remain so for a while. German corporations are different story, however.

michael vassar August 22, 2005 at 9:35 am

Kazakhstan is just rising on oil prices. Buying their market is probably pretty much a proxy for buying oil futures, as oil’s all they make.

lebeaux August 22, 2005 at 10:55 pm

Yes, nothing screams ‘good economy’ quite like a country with 16 percent unemployment and a government run by militant, semi-retarded marxists…. oh wait did I say good economy, I guess I actually meant… super-duper-crappy.

andrew jones March 11, 2006 at 10:58 am

A little late to this, but I’d say Nigeria, booming entertainment industry, huge population, fairly well run, but for all I know Nigeria is valued decently in economist circles. All that aside Indonesia’s economic recovery is probably affecting Papa New Gueina it being sandwiched between Indonesia and Australia seems like a good place. Plus it’s close to China hence China could import a good amount of natural resources from New Geuina if they could get a little more modernized. Kenya is notable in that it’s managed to not only attract Chinese investment, but also Korean (LG is building cell phones there now).

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