Slowdown in Emerging Markets: Rough Patch or Prolonged Weakness?
Franziska Ohnsorge and
Lei Sandy Ye1
No 101741, Policy Research Notes (PRNs) from The World Bank
A synchronous growth slowdown has been underway in emerging markets (EM) since 2010. Growth in these countries is now markedly slower than, not just the pre-crisis average, but also the long-term average. As a group, EM growth eased from 7.6 percent in 2010 to 4.5 percent in 2014, and is projected to slow further to below 4 percent in 2015. This moderation has affected all regions (except South Asia) and is the most severe in Latin America and the Caribbean. The deceleration is highly synchronous across countries, especially among large EM. By 2015, China, Russia, and South Africa had all experienced three consecutive years of slower growth. The EM-AE growth differential has narrowed to two percentage points in 2015, well below the 2003-08 average of 4.8 percentage points and near the long-term average differential of 1990-2008. The recent slowdown in EM has been a source of a lively debate, as evident from the quotations at the beginning of this note. Some economists paint a bleak picture for the future of EM and argue that the impressive growth performance of EM prior to the crisis was driven by temporary commodity booms and rapid debt accumulation, and will not be sustained. Others emphasize that a wide range of cyclical and structural factors are driving the slowdown: weakening macroeconomic fundamentals after the crisis; prospective tightening in financial conditions; resurfacing of deep-rooted governance problems in EM; and difficulty adjusting to disruptive technological changes. Still others highlight differences across EM and claim that some of them are in a better position to weather the slowdown and will likely register strong growth in the future. This policy research note seeks to help move the debate forward by examining the main features, drivers, and implications of the recent EM slowdown and provides a comprehensive analysis of available policy options to counteract it.
Keywords: growth rates; monetary policy; capital markets; capital goods; durable goods; economic growth; technological progress; urbanization; multipliers; terms-of-trade; international capital; exposures; oil prices; fiscal deficits; interest; income; expectations; economic consequences; interest rate; emerging economies; property rights; exchange; balance of payments; macroeconomic policy; resource allocation; labor force; political economy; international capital markets; developing economies; revenues; technological changes; fiscal policy; world development indicators; economic effects; labor inputs; incentives; equilibrium; economic consequences; models; capital markets; sustainable development; central banks; energy taxes; business cycles; developed countries; economic effects; emerging market economies; economic activity; fiscal policies; oil prices; global economy; oil; currency; export growth; terms of trade; advanced economies; population growth; irreversibility; debts; natural resources; options; labor productivity; interest rates; structural unemployment; opec; emerging market; debt; scientific knowledge; governance indicators; tax reform; private capital flows; labor productivity; dividends; terms of trade; private capital; natural resources; production processes; metals; financial system; subsidies; efficiency; purchasing power; market economies; taxes; capital constraints; government securities; resources; infrastructure investment; unemployment; emerging markets; deregulation; energy consumption; equity; investors; productivity growth; data availability; consumption; scientific knowledge; wages; international trade; volatility; values; financial crisis; future; fiscal policies; economic • growth; share of world output; discount rates; credit; world economy; purchasing power; demand; national income; market economies; aggregate demand; disinflation; population growth; environments; expenditures; capital flows; property; advanced economy; global risks; labor markets; environment; labor force; resource allocation; developed countries; monetary policies; expansionary fiscal policy; economics; inflation-targeting; terms of trade; securities; output; global financial market; capital goods; governance; stock indexes; discount rates; business cycles; currencies; government debt; economic development; trade; land; market volatility; financial market; investment; bond; share; investment climate; global output; balance sheets; coal; business environment; economic development; sustainable development; banking; global investors; private consumption; world trade; productivity growth; economists; energy taxes; tax reform; economic • growth; demographic; environmental; labor markets; commodity prices; power outages; commodity; structural unemployment; adverse effects; economic growth; property rights; labor inputs; global economic prospects; prices; capital constraints; economic conditions; international best practice; economies; production processes (search for similar items in EconPapers)
Pages: pages 67 pages
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Working Paper: Slowdown in Emerging Markets: Rough Patch or Prolonged Weakness? (2016)
Working Paper: Slowdown in emerging markets: rough patch or prolonged weakness? (2016)
Working Paper: Slowdown in Emerging Markets: Rough Patch or Prolonged Weakness? (2015)
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