The Next Move: Consequences for Emerging Markets

IMF Blog, June 2, 2021

Source details

Publication: Finance & Development issue focused on emerging markets.
Author: Gita Bhatt.
Date: June 2, 2021.
Definition emphasis: "emerging markets" as economies in the middle—neither advanced nor low-income—characterized by widely diverse sizes and growth rates and growing systemic relevance that helps anchor global stability.
Core observation: multispeed economic recovery within and across countries, sectors, age groups, genders, and skill levels.

Recovery trajectories:
- Some countries, exemplified by China, "have managed to emerge quickly from the present crisis."
- Others "may struggle for years to deal with the pandemic’s aftereffects."
Expert contributions highlighted in the issue:
- Rupa Duttagupta and Ceyla Pazarbasioglu: stock-taking with focus on debt, economic policy trade-offs, and priorities for stronger growth.
- Richard House and David Lubin (investors): analysis of how emerging market assets have fared during the pandemic and reasons they are unlikely to suffer systemic crises as in the 1980s and 1990s.
- Şebnem Kalemli-Özcan: warns of potential for greater turbulence as US interest rates rise.
- Francisco Ferreira: finds the pandemic’s effect on inequality is "manifested in counterintuitive ways, depending on how you measure it."
- Jim O’Neill: revisits the diverging fortunes of Brazil, Russia, India, and China, "20 years after coining the acronym 'BRICs'."

Heterogeneous outcomes:
- Emerging markets face differing prospects, priorities, and challenges due to diversity in size and growth.
Systemic importance:
- Group’s growing systemic relevance contributes to global stability, but vulnerabilities remain.
Inequality:
- The pandemic’s impact on inequality is complex and measurement-dependent.
Financial stability risks:
- Investor views signal lower risk of systemic crises similar to the 1980s and 1990s, though rising US interest rates could increase turbulence for some economies.

Immediate priority:
- "Procuring, producing and distributing vaccines to end this pandemic."
Policy strategies for stronger, more inclusive growth:
- Well-calibrated economic policies that improve access to health care and education.
- Help create jobs and support and retrain displaced workers.
- Strengthen public investment in green projects and digital infrastructure.
Overarching goal:
- Build more inclusive economies that benefit everyone while ensuring macroeconomic stability.

As in a chess game, every move by leaders and policymakers has consequences; the piece argues "Let them be the right ones."

Source: The Next Move: Consequences for Emerging Markets — Finance & Development, June 2, 2021.