Emerging markets have grown at a remarkable pace through most of the 2000s. They even rebounded strongly from the Great Recession, notwithstanding the sluggishness in advanced economies. Easy global financial conditions, rising commodity prices and beneficial terms of trade potentially compensated for weak external demand from the advanced economies.
But now, emerging market growth, while still strong, has begun to slow. This oddly coincides with an outlook for advanced economies that is improving, even if gradually. So what’s behind this dichotomy?
Emerging markets are adjusting to changes in the external environment. On the one hand, the incipient recovery in advanced economies is helping emerging markets, including through higher exports. On the other hand, the favourable external financing conditions are now beginning to reverse, implying a tougher financial environment for emerging markets. Then you have domestic factors, which appear to have pulled down growth in some emerging markets (see also IMF blog post on January 22, 2014, and December 18, 2013).
Filed under: Advanced Economies, Asia, Economic outlook, Economic research, Emerging Markets, Financial Crisis, growth, International Monetary Fund | Tagged: China, emerging market, Great Recession, WEO, World Economic Outlook | Leave a comment »