Emerging markets drive global recovery
Marina Primorac
Emerging markets survived recession better than advanced economies
Emerging economies becoming more important global players Increased
economic heft plus increased voice equal newfound responsibility
Major emerging markets have exited from the global financial crisis
in the driver's seat.
They are gaining in strength and prominence and helping the world
recover from the recession that plagued advanced economies along with
everyone else, according to the latest edition of Finance & Development
(F&D) magazine.
Analysis by Eswar Prasad of Cornell University and IMF's Ayhan Kose
finds the economic ascendancy of emerging markets such as Brazil, China,
India, and Russia will allow them to play a significant role in global
economic governance and take on more responsibility for economic and
financial stability.
Emerging markets as a group weathered the global recession better
than advanced economies. Many have seen growth bounce back during the
past year, and they seem poised for high growth in coming years.
There was variation among regions, however. Emerging Asia saw the
most favourable outcomes, with modest declines in growth.
The emerging economies of the Middle East and North Africa (MENA) and
those in sub-Saharan Africa also enjoyed only small declines in output,
possibly due to their modest exposure to trade and financial flows from
the advanced economies.
In contrast, emerging markets in Europe and Latin America suffered
during the crisis because of their ties with advanced economies, though
those in Latin America recovered relatively strongly.
The particular success of emerging economies in Asia, MENA and
sub-Saharan Africa was thanks to a combination of factors, including
macroeconomic policies that brought inflation under control and limited
public debt; reduced dependence on foreign financing, current account
surpluses that insured against reversals of capital inflows and
diversification in production and exports.
Improved trade and financial linkages increased resilience, and
rising incomes and a burgeoning middle class translated into growing
domestic markets for emerging market economies, the authors say.
Different challenges
In coming years, emerging market economies will face challenges very
different from those of the advanced economies. Rather than weak growth
and deflation, emerging markets will need to guard against rising
inflation, surging capital inflows and the associated risk of bubbles in
asset and credit markets, and the threat of rapid currency appreciation.
Along with their increase in economic heft, emerging economies are
playing a larger role in setting global priorities.
IMF External Relations Department
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