Emerging markets enter slow growth era 

Growth in emerging markets is slowing to its lowest ebb since the aftermath of the financial crisis due to a combination of China’s fading dynamism, a sputtering performance in eastern Europe and Latin America’s slowdown.

Evidence that emerging economies are entering a new era of slower growth will fuel concerns for the global outlook as western countries continue to struggle, the oil price lurches towards a four-year low and eurozone stalwart Germany suffers from declining growth

Data from 19 large emerging economies collated by research firm Capital Economics show that industrial output in August and consumer spending in the second quarter fell to their lowest levels since 2009. Export growth in August also plunged.

These trends are contributing to a sense that slower growth is becoming a permanent fixture among the world’s most dynamic group of economies. “This is the new normal,” said Neil Shearing, chief emerging markets economist at Capital Economics. “For the rest of the decade this is it. This is as good as it gets.”

Christine Lagarde, the IMF’s managing director, said there was “clearly a major slowdown in countries like Brazil and Russia”, pointing out that the end of quantitative easing would send shockwaves to emerging economies. “We’re going to continue to caution a lot of the emerging market economies . . . to just prepare themselves for a bit more volatility than we have observed over the last few months,” she said.

George Magnus, senior adviser to UBS, said: “It is now clear that the exceptional acceleration in emerging market growth between 2006 and 2012 is over,” he said, noting that the IMF has revised downward its forecasts for EM growth on six occasions since late 2011.

Source: FT- Emerging markets enter slow growth era

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