The Golden Age for Emerging Markets is over

The coronavirus crisis is likely to accelerate some of the structural trends already underway that are weakening emerging markets’ longer-term growth prospects.

Our View

Rapid EM growth in the 2000s and early 2010s was a one-off. And headwinds to EMs’ prospects are building:

  • Some EMs may face a permanent loss of output from the coronavirus crisis.
  • US-China decoupling is accelerating. EMs were the big winners from the wave of globalisation in the 1990s and 2000s. By the same token, they will be the big losers from the end of globalisation.
  • China’s policy response to the coronavirus crisis will exacerbate the country’s misallocation of resources, and cement the economy’s structural problems.

Over the next decade, China’s trend rate of growth will slow to just 2%, while India will lead the pack. Poorer EM regions (Africa and Asia) are likely to experience faster growth than richer EM regions (Emerging Europe and Latin America).


Real GDP (% y/y, Average)


In aggregate, we expect EM GDP growth to ease from an average of 5.5% in the 2000s and 2010s to around 3.5% in 2020-2040. Growth will still be faster than that in the developed world. But incomes will converge more slowly than previously.

This slowdown need not in itself be bad for the rest of the world. That said, given China’s high debt level, there is a risk that its adjustment to slower growth is not a smooth one.

There are geopolitical implications too; if we are right in expecting China’s growth rate to slow, assumptions that China will overtake the US to become the world’s biggest economy will be proved wrong.

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