IMF Working Papers

Slowdown in Emerging Markets: Sign of a Bumpy Road Ahead?

Author/Editor:

Evridiki Tsounta

Publication Date:

November 14, 2014

Electronic Access:

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Summary:

Following very strong growth during the period 2000–12, emerging market economies (EMEs) experienced a slowdown in the last couple of years. This paper examines the supply-side drivers of the strong growth performance of 63 EMEs and investigates if the recent slowdown in growth is transitory or a more permanent phenomenon. We find that on average the recent slowdown is explained equally by structural and cyclical factors, although there are large variations across countries and regions. While the cyclical component of the slowdown can be corrected by countercyclical policies (provided that there is sufficient policy space), structural bottlenecks are harder to address. Given the expected moderation of capital accumulation and some natural constraints on labor, the strong growth momentum of 2000–12 is unlikely to be repeated going forward, unless TFP performance improves significantly via structural reforms.

Series:

Working Paper No. 2014/205

Subject:

Capital accumulation Emerging and frontier financial markets Financial markets Gross fixed investment Labor National accounts Production Total factor productivity