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Major emerging markets—Improved governance supports growth outlook
Public sector governance improved in Australia’s major emerging market export destinations in 2024, according to recently released World Bank data. Improved governance provides a foundation for stronger and less volatile macroeconomic performance, fostering investor confidence and lowering country risk. Among Australia’s largest emerging market export destinations, indicators of governance quality were highest in the United Arab Emirates (with an average score of 68, where 0=lowest and 100=best possible score), Qatar (66), Malaysia (64), Fiji (64) and Saudi Arabia (59). Strong improvements between 2023 and 2024 surveys were seen in Saudi Arabia (up 2.3 points), Sri Lanka (up 2.1 points), Malaysia (up 1.9 points), Fiji (up 1.0 point) and India (up 0.6 points).
While institutional quality can deteriorate quickly, improvements tend to accrue and shape economic growth outcomes over a longer period of time. Consistent improvement over the past 10 years is seen most strongly in Saudi Arabia, where all indicators except those on voice and accountability have improved steadily; Fiji, where the return to democracy coincided with average governance indicators rising 16% since 2014; and Nepal, though recent political instability will weigh on growth and governance in coming years. India’s scores steadily improved with persistent infrastructure development and growing capital markets, and in Gulf Cooperation Council (GCC) countries where reforms to improve the business environment have taken effect. Vietnam’s ambitious bureaucratic reform in 2025 will improve government efficiency and compound its 2.4% governance score improvement of the last 10 years.
Stronger economic growth—and by extension, better prospects for Australian export growth—is associated with better regulatory quality, government effectiveness, rule of law, political stability, control of corruption, and voice and accountability (Chart). Indeed, IMF growth forecasts are stronger in emerging markets where these indicators improved, especially India and Vietnam.
