Are Emerging Markets Adjusting to a New Normal?

IMF Blog, April 1, 2014

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Emerging markets grew rapidly through most of the 2000s and rebounded strongly from the Great Recession despite sluggishness in advanced economies.
Recent signs indicate emerging market growth, while still strong, has begun to slow even as the outlook for advanced economies is improving gradually.
The slowing reflects adjustments to changes in the external environment combined with domestic factors that have pulled down growth in some emerging markets.

Easy global financial conditions, rising commodity prices, and beneficial terms of trade previously helped offset weak external demand from advanced economies.
Emerging markets now face a reversal of favourable external financing conditions, implying a tougher financial environment.
The incipient recovery in advanced economies is helping emerging markets through higher exports, even as other external forces become less supportive.
The forthcoming Chapter 4 in the April 2014 World Economic Outlook shows that, on average, external conditions tend to explain at least half of the growth variation in emerging markets.
There are considerable differences in the contribution of external factors across time and across countries.
The chapter also examines the implications of China’s transition to a slower, even if more sustainable, pace of growth, and its impact on other emerging markets.

Domestic conditions have pulled down growth in some emerging markets; if these dampening effects persist, growth could adjust to a lower level than before, at least temporarily.
The combined interplay of external and internal factors determines whether emerging market growth steadies or shifts to a new, lower normal.

Further insights on the interplay of external and internal factors on emerging market growth were to be available on April 3rd.
Watch the live webcast of the analytical chapters of the World Economic Outlook on Thursday April 3 at 9 am (EST) on www.imf.org.

Authors: Aseel Almansour, AQIB ASLAM, John Bluedorn, Rupa Duttagupta
Date: April 1, 2014
Related chapter: Chapter 4 in the April 2014 World Economic Outlook
Organization: The IMF, based in Washington D.C., is an organization of 191 countries.

Source: IMF IMFBlog page titled "Are Emerging Markets Adjusting to a New Normal?", April 1, 2014.