The emerging economies are the major attractions for the investors given the slow and the sluggish growth of the developed markets. As per the data released by IMF, economic growth rate of the developing economies will improve continuously over the next five years wherein the developed economies may not grow that well. Bigger emerging economies such as that of India and China are expected to show decent growth. As per various estimates and forecasts, emerging economies in totality will contribute around 70 percent of total growth with India and China as major contributors (Barnes, 2016). Various factors are responsible which led to the growth of the emerging economies as against the growth of the developed economies. Factors such as negative bond yields on large country debts, an upward surge in the prices of oil, stability of the economy of China and the postponement of the Fed rate increase from a long time now are the main reasons behind the insurgence of the economies of the developing countries.
However the question which is to be answered is whether the factors mentioned above sustain in the coming five years. The currency had performed outstandingly in the year 2016, simply because the negative bond yields in Japan and the eurozone in conjunction with very low fed rates in the USA was the main cause of the emerging economies performing so well. Unfortunately the same would continue is not guaranteed. As per the Bank of Japan, they have decided to undertake fixing up of the long term bonds at an yield of 0 and there are also talks that the European Central Bank may also cut down its bond purchasing plan by March 2017.
Unfortunately, the economy of USA is also on a recessionary mode again due to the oil shock and the lack of certainty in because of the elections for the post of the President. However as per IMF, the Fed may increase the rate in the month of December 2016 and twice in the year 2017 which would make funding in hard currencies very dear thereby making their asset base less attractive as compared to the developed economies.
Further to this, many of the emerging economies are oil exporters and the kind of upward movement felt in this sector is very unlikely to be maintained in the year 2017 since the predictions show that the average price of Brent will rise only to $51/ barrel from $43/barrel which would slow down the economic growth of the emerging countries (Yesilada 2016). Also China would fail to contribute to the growth rate of the emerging economies in the next five years as its economy is motivated by the economic and financial incentive which has reached its brim. It is clear that Beijing will not help in the growth of the emerging economies due to lack of demand increase from China.
Last but not the least, the growth of the emerging economies might not sustain for the next five years simply because these economies grew basis globalisation, but the global trade is no more doing well. It would be wrong to state that the emerging economies are performing well. Most expected that these economies will soon face a turbulence and their economic growth to hurt as the factors that had driven their growth all seems to subside or deteriorate in the coming five years. The factors which had led to the upward movement of the economy of the developing nations, seems to die out at a faster pace, so much that the coming five years may face recession again (Gruss et.al. 2017).
Barnes, P. (2016). Emerging Markets Economic Growth Outpaced Developed Markets. Retrieved from https://marketrealist.com/2016/12/emerging-markets-economic-growth-outpaced-developed-markets/
Gruss,B., Nabar, M. & Poplawski-Ribeiro, M. (2017). Emerging Markets and Developing Economies: Sustaining Growth in a Less Supportive External Environment. Retrieved from https://blogs.imf.org/2017/04/12/emerging-markets-and-developing-economies-sustaining-growth-in-a-less-supportive-external-environment/
Yesilada,A. (2016). Emerging Markets: Will Growth Continue? Retrieved from https://www.aljazeera.com/indepth/opinion/2016/10/emerging-markets-growth-continue-161012070851489.html