Emerging markets, increasingly dependent on China for their own growth, may suffer as the world’s second-largest economy decelerates, the International Monetary Fund said.
“China’s transition into a slower, if more sustainable, pace of growth will also reduce growth in many other emerging market economies, at least temporarily,” the IMF said in part of its latest World Economic Outlook report released today.
The market turbulence in mid-2013 as the U.S. Federal Reserve weighed the tapering of its bond-buying program also showed that emerging markets will suffer if access to capital abroad is harder to obtain, the IMF said. Growth forecasts in the report are scheduled to be released April 8.
“Emerging markets are facing a more complex growth environment than in the period before the crisis,” the IMF said. “Mounting external financing pressure without any improvement in global economic growth will harm emerging markets’ growth.”
Investors pulled money from countries such as Brazil, India, Indonesia and Turkey after then-Fed Chairman Ben S. Bernanke indicated in May 2013 that the central bank might start curtailing its bond-purchase program.
China’s recent economic slowdown accounted for about a quarter of a 2 percentage-point decline in average emerging-market growth since 2012 compared compared wit the 2010-2011 period, the Washington-based fund said.
The country targets growth of 7.5 percent this year after the economy expanded 7.7 percent in 2013 and 2012 and 9.3 percent in 2011.
The IMF expects “modest improvements” for the global economy this year and next after an expansion of about 3 percent last year, the fund’s Managing Director Christine Lagarde said yesterday.
IMF forecasts released in January estimated an expansion in developing countries of 5.1 percent in 2014 from 4.7 percent in 2013.
In a separate chapter released today, the IMF also said it forecasts global interest rates adjusted for inflation will rise “moderately” in the medium term as debt levels in advanced economies increase and emerging markets slow.