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Title: Slowdown in Emerging Markets: Rough Patch or Prolonged Weakness?

Author(s): Tatiana Didier, Ayhan Kose, Franziska Ohnsorge and Lei Sandy Ye

Publication Date: January 2016

Keyword(s): emerging markets, fiscal policy, growth slowdown, monetary policy, policy space and structural reforms

Programme Area(s): International Macroeconomics and Finance

Abstract: Emerging markets (EM) face their fifth consecutive year of slowing growth and a possibly longer period of sluggish performance than previously thought. This paper presents a comprehensive analysis of the nature of and the appropriate policy responses to the growth slowdown in EM. It reports three main results. First, the slowdown is synchronous and protracted, affecting a sizable number of EM, especially large ones. Second, it has been driven by both external factors, including weak world trade, low commodity prices, and tightening financial conditions; and domestic factors, including slowdown in productivity growth, bouts of policy uncertainty, and an erosion of policy buffers. Both structural and cyclical factors have contributed to the slowdown. Third, the room for accommodative cyclical fiscal and monetary policies is limited in many EM, lending urgency to putting in place structural reforms to upgrade governance structures, improve business environments, raise human and physical capital, and manage demographic pressures.

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Bibliographic Reference

Didier, T, Kose, A, Ohnsorge, F and Ye, L. 2016. 'Slowdown in Emerging Markets: Rough Patch or Prolonged Weakness?'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=11065