What it means
Tiger economies tend to share a recognisable recipe. They invest heavily in education, build ports and roads, welcome foreign investment, and focus on selling goods and services abroad rather than only at home.
Over a few decades that mix can turn a low-income country into a rich one. The label has also been applied outside Asia.
Ireland's rapid growth in the 1990s and 2000s earned it the nickname "Celtic Tiger", for example. The common thread is sustained growth at rates well above the world average, not geography.
For a business or investor, a tiger economy means rising demand, growing wages and expanding capital markets. It also means rapid change, because the sectors that drive growth early on, such as low-cost manufacturing, are often replaced by higher-value ones such as finance, technology and services.
Companies that supply or sell into these countries need to expect their customers to become richer and more demanding over time. Rapid growth does not remove risk.
Credit can expand faster than the economy can safely absorb, property and asset prices can bubble, and an economy that depends on exports is exposed to downturns in its customers' countries. Several fast-growing economies have suffered sharp setbacks after periods of heavy borrowing.
A quick way to feel the power of growth is the rule of 72, a shortcut that tells you how long it takes something to double. Divide 72 by the annual growth rate in per cent, and the answer is the approximate number of years to double.
It shows why even a few extra points of annual growth change a country's size dramatically within a generation. Governments in these economies usually play an active part, setting national goals and steering savings into industry.
Critics argue that this can lead to favoured companies and weak accountability, while supporters point to the speed of the results. Business readers should treat the debate as a reminder that the policy environment can change quickly and that contracts should be written with that in mind.
In practice
Real-world examples.
Example
A logistics company expands its freight network into a fast-growing Asian economy because it expects trade volumes to double within a decade. The finance team funds the new warehouses in stages, releasing the money only when volumes reach agreed targets.
Example
A consumer brand sees its sales in a tiger economy grow faster than anywhere else in its portfolio. Management raises its marketing budget there, but also sets aside a reserve for currency swings, since local sales are reported in dollars.
Example
A pension fund holds a small allocation to equities from fast-growing economies. The fund's risk committee reviews it every year, because the potential for strong growth comes with sharp swings in prices from one year to the next.
Formula
Calculation
Years to double (approx.) = 72 / annual growth rate in %
Suppose a fictional economy has an output of $200 billion and grows at 8% a year.
Years to double = 72 / 8 = 9 years.
Check: 200 x 1.08 repeated nine times gives about 200 x 1.999 = $399.8 billion, so the output is very close to $400 billion after nine years.
At 2% growth, the same economy would take 72 / 2 = 36 years to double, which shows the gap between a tiger and a slow-growth economy.Case study
Seen in the real world.
Meridian Fastening is an illustrative, fictional manufacturer of industrial screws and bolts. For years it sold to factories in a tiger economy that was building its first large car plants.
As incomes rose, wages rose too, and the factories moved to automated production. Meridian's finance director saw that its low-priced products were losing ground to specialised, higher-priced fasteners that automated lines required.
The illustrative response was to move its product mix upward rather than compete on price. Meridian invested $3 million in a precision line and aimed it at the same customers, who by then valued quality over cost. The lesson is that selling into a tiger economy means planning for the economy's own progress, not just for today's customer.
Watch out
Common mistakes.
- Assuming that a tiger economy will keep growing at the same rate forever, when growth usually slows as the economy matures.
- Believing the term only refers to Asia, when it has also been used for countries such as Ireland.
- Ignoring the risks of rapid credit growth and asset bubbles in a fast-growing economy.
Questions
People also ask.
Which economies are the original Asian Tigers?
They are Hong Kong, Singapore, South Korea and Taiwan, which grew rapidly through exports and industrialisation.
What is the difference between a tiger economy and an emerging market?
A tiger economy is defined by especially rapid, sustained growth, while an emerging market is a broader term for a developing country with growing but still limited financial markets.
Does a tiger economy always make a good investment?
No, because high growth is often already reflected in prices, and fast-growing economies can suffer sharp downturns.
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