The Strategist

IIF: Economic growth in emerging markets will outstrip developed countries soon

04/17/2018 - 14:33

Forecasts of the Institute of International Finance (IIF) suggest an increase in a gap between economies of the world in terms of growth rates in the coming years. Developed economies, including such large ones as the US and the EU, will be growing at a rate of no more than 3% per year until 2019, while emerging markets - primarily China and India – will be outpacing them in terms of GDP growth rate threefold. On average, IIF suggests that the economic recovery in developed countries in 2019 will reach only 2.2%, and the divergence in GDP growth rates from emerging markets will become the most significant since 2013.

Thus, the growth of US GDP, according to the forecast of IIF, will accelerate to 2.9% in 2018, from 2.3% in 2017. In 2019, however, it will slow down to 2.5%. The institute expects that the US Federal Reserve will raise the rate three times in 2018, and budget stimulation will add 0.3 percentage points to GDP. The economies of the euro area countries will demonstrate similar dynamics of GDP growth. In 2018, it will reach 2.5% (2,3% in 2017), and in 2019 the rate will slow down to 2.1%. The growth of world GDP against this background will accelerate to 3.5% in 2018 (earlier IIF expected growth of 3.3%) and to 3.4% in 2019. 

The outlook for emerging markets implies an increase in economic growth from 4.7% in 2017 to 5% in 2018 and 5.1% in 2019. India will seize leadership in terms of GDP growth by 2019 - its economy will grow by 7.6% after rising by 7.9% in 2018. In China, the economic recovery is expected to slow from 6.9% last year to 6.7% in 2018 and 6.6% in 2019. A similar trend will be observed in the Philippines (6.7% growth in 2018), Indonesia (5.4% and 5.5%) and Malaysia (5.5% and 5.2%). In Africa, Egypt will grow at a comparable rate (5.1% and 5.4% respectively). Countries of the "new" Europe - the Czech Republic (3.6% and 3.3% in 2018-2019) and Poland (4.1% and 3.7%), as well as Turkey (4.2% and 4% ,4%) – will take an intermediate position.

Venezuela is an anti-leader of the IIF’s forecast: after the economic fall of 15.5% in 2017, analysts expect a decline of 14.8% in 2018; the fall will slow down only in 2019, when the oil exporter will lose only 7.5% of GDP.