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Risky Growth Engines

WASHINGTON, DC – While the rich world puts its post-crisis house in order, developing countries as a whole are becoming the new engine of global growth. Increasingly, they are a force pulling the advanced economies forward. But switching locomotives is never free of risk.

As my colleague Marcelo Giugale and I argue in our recent book The Day After Tomorrow, there are at least four tracks along which this switchover is taking place. First, public- and private-sector balance sheets in most emerging economies are relatively clean. While deleveraging is ongoing in advanced economies, many developing countries will be able to explore untapped investment opportunities – infrastructure bottlenecks being a glaring example.