Macq-ro insights:What’s next for EM economies?

Emerging market economies (EME) have been battered by seven negatives since 2011, table below. Whilst some of these are abating, two new headwinds worry us: falling property values with the credit down-cycle, and declining FDI inflows as the elevated global investment-to-GDP ratio adjusts.

These are headwinds for consumption and investment, respectively.

An extended period of subdued growth: The major 6 emerging market economies’ aggregate real GDP growth is expected to trend around 4.6% pa 2017-20, some 2.8% pa less than the 7.4% pa achieved over 2003-11. Versus the 10 advanced economies, the real GDP growth premium was +5.2% pa over 2003-11, falling to an expected +2.9% over 2013-18. Contributions from all three growth accounting factors (labour supply, capital accumulation, and total factor productivity) are fading, pages 9-22.