Emerging Markets and Developing Economies: Sustaining Growth in a Less Supportive External Environment
IMF Blog, April 12, 2017
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Bibliographic details
- Authors: Bertrand Gruss, Malhar Nabar, Marcos Poplawski-Ribeiro
- Published: April 12, 2017
Overview
- Authors: Bertrand Gruss, Malhar Nabar, Marcos Poplawski-Ribeiro
- Publication date: April 12, 2017
- Summary focus: How external conditions contributed to past growth in emerging market and developing economies, the challenges from a less supportive external environment, and policy options to sustain convergence and growth.
Role of external conditions
- Emerging market and developing economies now account for close to 80 percent of global economic growth.
- These economies account for close to 85 percent of the growth in global consumption.
- Integration developments since the 1990s:
- Greater integration into the global trading system and international capital markets.
- Relative prices of exports and imports, external demand, and external financial conditions increasingly influence growth in real income per capita.
- Quantitative finding:
- About one third of the 1½ percentage points pickup in the average growth rate of income per capita since 2005, relative to the 1995-2004 period, can be attributed to stronger capital inflows.
- External demand from other emerging market and developing economies has become a more powerful force on medium-term growth.
- Favorable external conditions affect the growth process by:
- Increasing the likelihood of growth accelerations.
- Lowering the likelihood of growth reversals.
- Producing sustained changes in growth rates with long-lasting effects on the level of income per capita.
Growth in a more complicated external environment
- Post-2000 period featured exceptionally favorable external conditions:
- Strong external demand.
- Relatively abundant capital inflows.
- An upswing in commodity prices.
- Recent shifts weakening the external impulse:
- Slow recovery in advanced economies has weakened demand for emerging market and developing economy exports.
- China has relied less on commodity imports as it rebalances toward consumption and services.
- The commodity cycle has turned since 2014, reducing growth rates among commodity exporters.
- Additional elements that may persist and weigh on external support:
- Risk of protectionism in advanced economies.
- General tightening of external financial conditions as US monetary policy normalizes.
- Implication: Emerging market and developing economies are likely to experience a weaker growth impulse from external conditions than in the past.
Room for convergence and policy prescriptions
- Despite weaker external support, these economies can enhance growth by:
- Strengthening institutional frameworks.
- Protecting trade integration.
- Permitting exchange rate flexibility.
- Containing vulnerabilities from high current account deficits and large public debts.
- Some policies can directly boost growth irrespective of external conditions.
- Remaining potential for catch-up:
- With 90 percent of the group at levels of income per capita less than half that in the United States, there is considerable room for catch-up growth and convergence.
Source: Emerging Markets and Developing Economies: Sustaining Growth in a Less Supportive External Environment, Bertrand Gruss, Malhar Nabar, Marcos Poplawski-Ribeiro, April 12, 2017.
Content in this bundle
- 新兴市场和发展中经济体：在不利的外部环境下维持增长; IMF博客
- 新興市場及び発展途上国経済: 外部環境支援薄れる中の成長維持は: バートランド・グラス、 マルハ―・ナバー、 マルコス・ポプロースキ・リベリオ iMFdirect ブログ 2017年4月10日掲載
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