## Three Key Questions About the Slowdown in Emerging Markets

_IMF Blog, September 18, 2014_

## Source details

**Canonical URL:** [Three Key Questions About the Slowdown in Emerging Markets](https://www.imf.org/en/blogs/articles/2014/09/18/three-key-questions-about-the-slowdown-in-emerging-markets)

## Other formats

- [Markdown version](/en/blogs/articles/2014/09/18/three-key-questions-about-the-slowdown-in-emerging-markets/index.md)
- [Structured JSON version](/en/blogs/articles/2014/09/18/three-key-questions-about-the-slowdown-in-emerging-markets/index.json)
- [Bundle manifest](/en/blogs/articles/2014/09/18/three-key-questions-about-the-slowdown-in-emerging-markets/bundle-manifest.json)

## Bibliographic details
- Authors: Sweta Saxena
- Published: September 18, 2014

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### Are emerging markets slowing down?
- Yes — they have been slowing down for some time.
- GDP growth path:
  - "7 percent" during the pre-crisis period (2003-8)
  - "6 percent" over the post-crisis period (2010-13)
  - "5 percent, in our projections, over the next 5 years (2014-18)"
- Revisions to the medium-term outlook have been serially downward since 2010; this pattern of repeated downward revisions is highlighted as unique to the current downturn.
- The slowdown is broad based:
  - Growth rates are lower than the pre-crisis average in "more than 70 percent" of emerging markets since 2012.

### Implications for the world economy
- Overall assessment: Yes — the slowdown has meaningful spillovers (see the IMF's 2014 Spillover Report).
- Expected spillover channels and effects:
  - Trade channel: A "1 percentage point" slowdown in emerging market economies lowers growth in advanced economies by "¼ percentage point," on average, through reduced trade.
  - Commodity prices: Slower emerging market demand leads to lower commodity prices; the income effect depends on whether a nation mainly consumes (benefit) or produces (loss) those commodities.
  - Financial sector: Slower growth can trigger loan repayment problems and capital losses for banks, including banks in advanced economies exposed to Emerging Market borrowers.
  - Regional/neighborhood effects: Slowdowns transmit locally through trade, remittances, and financing/cooperation agreements. Examples cited:
    - China → emerging Asia (trade)
    - Brazil → Southern Cone countries (trade)
    - Russia → Central Asian neighbors (remittances)
    - Venezuela → Central American neighbors (financing and energy cooperation agreements)

### Can anything be done to reduce risks?
- Yes — international coordination and policy preparedness are emphasized.
- Recommended approaches:
  - Increased collaboration between advanced and emerging market economies to manage spillovers and potential spillbacks (effects on the original spillover source economies).
  - Renewed attention to structural reforms in emerging economies to boost productivity and medium-term growth.
- Common reform priorities (national priorities differ, but common threads include):
  - Addressing infrastructure needs
  - Improving education and addressing skill shortages
  - Enhancing competition and improving business climate

*Sweta Saxena, Three Key Questions About the Slowdown in Emerging Markets, September 18, 2014.*

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## Content in this bundle

- **2014 Spillover Report: IMF Multilateral Policy Issues Report -- IMF Policy Paper; June 25, 2014**
  - [2014 Spillover Report: IMF Multilateral Policy Issues Report -- IMF Policy Paper; June 25, 2014 (Markdown version)](/external/np/pp/eng/2014/062514.pdf.md){rel="alternate" type="text/markdown"}
  - [2014 Spillover Report: IMF Multilateral Policy Issues Report -- IMF Policy Paper; June 25, 2014 (PDF)](/external/np/pp/eng/2014/062514.pdf){rel="external" type="application/pdf"}

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## References

- [https://www.imf.org/wp-content/uploads/2014/09/ems-chart-1.jpg](https://www.imf.org/wp-content/uploads/2014/09/ems-chart-1.jpg)
- [https://www.imf.org/wp-content/uploads/2014/09/ems-chart-2.jpg](https://www.imf.org/wp-content/uploads/2014/09/ems-chart-2.jpg)
- [https://www.imf.org/wp-content/uploads/2014/09/ems-chart-3.jpg](https://www.imf.org/wp-content/uploads/2014/09/ems-chart-3.jpg)

_Source: https://www.imf.org/en/blogs/articles/2014/09/18/three-key-questions-about-the-slowdown-in-emerging-markets_