Maintaining the Emerging-Economy Growth Engine

SEOUL – The world’s emerging economies seem to be losing their dynamism. Countries that only a few years ago were being hailed for their resilience in the face of a global economic meltdown are now facing myriad challenges, reflected in significantly slower GDP growth. Is the emerging-economy growth engine breaking down?

From 2000 to 2007, annual growth in emerging and developing economies averaged 6.5%. More impressive, from 2008 to 2010, when the advanced economies were in recession or struggling through a fragile recovery, they managed to sustain 5.5% growth. In fact, at the end of that period, average growth stood at a very healthy 7.5%.

But then growth began to slow, with the annual rate falling to 4% in 2015. Even China, the largest and most dynamic emerging economy, recorded its lowest growth rate since 1990 (6.9%) last year, and the slowdown is forecast to accelerate this year. Many now argue that the emerging economies are settling into a “new normal” of slower growth, and that their days as the key driver of the global economy are over.

Despite their current struggles, it would be premature to write off the emerging economies. For starters, even if these countries’ growth rates do not return to pre-crisis levels, their contribution to the world economy should remain substantial, given that their share of world GDP in purchasing-power-parity terms has increased significantly, from 43% in 2000 to 58% in 2015.