EM Outlook – Recovery beckons

by: Marijke Zewuster , Arjen van Dijkhuizen , Peter de Bruin

EM-Outlook - 2014Q4 - Recovery beckons.pdf ()
  • On the back of accelerating growth in the industrial countries, we expect emerging markets to stage a moderate recovery in the next two years.. The key macroeconomic risks we see are faster-than-expected US rate hikes, rising bond yields, a hard landing in China and a further fall in commodity prices. Clearly, geopolitical risks also continue to loom large.
  • Emerging Asia, still global growth engine, despite China’s slowdown: Emerging Asia continues to do well among the emerging markets. Regional growth is expected to remain around 6% in the coming years, much higher than in other regions. The gradual slowdown in China is compensated by a pick-up in India and other export-oriented economies, profiting from an acceleration in the US and the eurozone.
  • Emerging Europe, Sharply divergent trends. Emerging Europe slowed through most of the year, reflecting the effects of the Ukraine/Russia crisis, and the slower than expected recovery in the eurozone. Encouragingly, growth in the region should gradually pick up during our forecasting horizon. This will mask sharply divergent trends among the region’s countries, though. Russia’s economy is likely to stagnate, and risks to its growth outlook are tilted to the downside. Meanwhile, the Czech Republic, Hungary, and Poland should benefit from a gradual strengthening of the eurozone recovery.
  • Latin America, long live the US. The major positive for the 2015/2016 growth outlook in Latin America is the worldwide recovery, particularly the strong rate of growth in the US. By contrast, internal developments are increasingly playing a negative role.