The end of the Golden Age

Widespread expectations for a sustained rebound in emerging market growth after the slowdown of recent years will be disappointed. The 2000s were a transient “Golden Age” for the emerging world, with a number of one-off supports for rapid growth that won’t be repeated. Growth over the next two decades will be closer to that seen in the 1980s and 1990s than the 2000s.
Mark Williams Chief Asia Economist
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There’s a lot that we don’t know about the new Omicron variant. But if it proves more virulent, the economic fallout would probably be largest in EMs in parts of Africa and South and South East Asia that have lower vaccination rates, more limited fiscal space and/or larger tourism sectors. The new variant may also temper the pace of tightening cycles in parts of the emerging world. In view of the wider interest, we are also sending this Emerging Markets Economics Update to clients of all our Emerging Markets services.

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24 November 2021

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Where might markets be wrong about Evergrande?

If Evergrande were to cause a financial or economic shock it would either be because policymakers failed to contain financial contagion or because the company’s collapse precipitated a much bigger decline in construction activity than most investors currently expect. The latter is probably the bigger risk and hinges on whether the company’s demise triggers a substantial drop in property sales.

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Evergrande circling the plughole

Evergrande’s collapse would be the biggest test that China’s financial system has faced in years. Policymakers’ main priority would be the households that have handed over deposits for properties that haven’t yet been finished. The company’s other creditors would suffer. Markets don’t seem concerned about the potential for financial contagion at the moment. That would change in the event of large-scale default, though the PBOC would step in with liquidity support if fears intensified.

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