Growth in major emerging countries: Convergences and tensions (Policy Brief 285 - September 2012)
Emerging countries now account for almost 40% of world GDP, over half of which comes from the four giants, China, India, Brazil, Russia, against only 20% ten years ago: strong and, for the first time in decades, relatively steady growth, has led to this impressive catch-up.
- Growth in major emerging countries: Convergences and tensions
The convergence between poor and rich countries in terms of living standards is far from being purely mechanical. However, some of them, especially among the “major emerging countries” seem to have entered into an accelerated convergence path, marked by a structural transformation entailing a reallocation of production factors to the most productive sectors. So far they have primarily relied on the development of the manufacturing sector producing tradable goods, given that it converges upon the technology frontier defined by the most advanced countries.
An undervalued currency, especially in China, has been the basic policy instrument, but it has its limits. For business partners facing the most severe economic crisis since World War II, bearing the weight of global imbalances is proving increasingly difficult. Emerging countries are forced to respond to this tension by accelerating improvements in production to rely less on this weak currency strategy. They must also use any available lever to stimulate domestic consumption even if this means facing a number of institutional barriers (modernisation of the financial system, social security, shared growth etc.). Finally, the development of political regimes also conditions the integration of these countries into the globalization process.
Summary
- The outbreak of emerging countries
- Export-based growth strategies since the early 1990s
- The sustainability of growth in emerging markets
- Authors: Mahdi Ben Jelloul, Nicolas Meunier and Mouhamadou Sy, Centre for Strategic Analysis, Economy Finance Department, Olivier Rech, Associate Energy Funds Advisors .
Keywords: BRICs; growth; convergence; institutions; global imbalances.