Ernst & Young’s Forecast Points to Slowdown in Emerging Markets

Economic expansion in the 25 leading rapid-growth markets (RGMs) has started to slow sharply since the beginning of this year but this will only be a temporary blip according to Ernst & Young’s quarterly Rapid-Growth Markets Forecast (RGMF).

RGMs, particularly in Asia, have the necessary tools available to ease both fiscal and monetary policy allowing growth to resume towards the end of the year.

Even with a slowdown in growth, RGMs are likely to weather the Eurozone crisis and will remain the engines of global growth. GDP is forecast to expand by 4.9 percent this year in stark contrast to the 0.6 percent contraction, at best, that is expected in the Eurozone. Output in the RGMs is expected to continue to pick up by 6 percent in 2013 and 6.5 percent in 2014.

However, there is a mixed picture emerging across the world. Asia and Africa continue to remain resilient but Central and Eastern Europe and Latin America are hindered by the slow growth in their key export markets of the Eurozone and United States respectively. If the Eurozone were to fall further into recession, RGMF predicts that the Czech Republic and Poland would be pushed into recession, with Hong Kong and Malaysia also hit hard due to their dependence on global trade.

Carl Astorri, Senior Economic Adviser to Ernst & Young’s Rapid Growth Markets Forecast.

“The RGMs are well placed to weather the major risks facing the global economy at the present time, given that they have the space to relax fiscal and monetary policy,” said Carl Astorri, Senior Economic Adviser to Ernst & Young’s Rapid Growth Markets Forecast. “This has already happened in some RGMs including in all of the BRICs. It is likely that there will be further easing of monetary policy in the months ahead, particularly if the global economy deteriorates further.”

The report mirrors other forecasts published in SCMR this year.

According to London-based Transport Intelligence (Ti), despite the economic slowdown and political upheaval, output in powerhouse economies such as Brazil, China and India remains high. Furthermore, the so-called “Arab Spring” countries are now viewed as more attractive places to do business.

SC
MR