Positive growth differential returns of emerging countries compared to US and Europe

Except Pandemic years and post-pandemic yearsContribution since 2002 Global Growth of Emerging CountriesIn particular, the Asia-Pacific region has been increasingly important in explaining the world economy.

showed this trend Special boost after the global financial crisisAlthough it originated in developed countries, it greatly influenced the development of emerging countries. In this context, China adopted aggressive stimulus measures to counter the effects of the global crisis on its economy, And by creating strong demand for basic products, it benefited many emerging countries that are exporters of raw materials. According to imf data, In 2009, the growth gap between emerging and developed countries reached 6.2 points. The difference normalized later, but was still quite positive (between 2 and 3 points) in the years before the Covid crisis. Growth in some emerging countries has been attributed to a mix of structural and cyclical factors slowing.

However, between 2021 and 2022 growth difference between developed and emerging countries greatly reduced averaging only 1.3 points, the lowest since 1999. Thus, in these last two years, it can be said that the world locomotive has once again been the United States, due, among other things, to significant tax levies by Washington. Now with rising inflation, US Federal Reserve and ECB They are stifling economic growth by seeing faster and sharper increases in interest rates. In 2023, very weak growth can be expected in the main advanced economies. The question, therefore, is whether the world economy can get a new locomotive, or at least repair an old one, that is, will we see emerging countries pulling the world economy again, increasing their credit The difference will increase. development with western economies.

and the answer is yes he better behavior can be expected In 2023, a positive growth gap not seen since 2017 is recovering, with many emerging countries leading the Asia-Pacific region. The justification is for two reasons.

First of all, for The break experienced in the last months of dollar appreciation Against most currencies in 2022. Many emerging countries have dollar-denominated debt and when the value of their local currency depreciates in relation to the dollar, the real value of their external debt increases locally, constraining their ability to pay and increasing their external debt. Perceptions of financing problems increase and result with less foreign investment. But now, With the Fed announcing perhaps a definitive pause in its cycle of monetary tightening, Policy management would be easier for emerging countries, they would not be forced to raise interest rates, and investments would be cheaper to finance.

in the second place, Reopening and recovery of the Chinese economy is the key, And that is, if in the past it was said that “when the United States sneezes, emerging countries catch a cold”, at present the growth of many emerging countries is more linked to the fate of China’s economy. United States.

Reopening the Asian Giant

betting on over-recovery of asian giant It may sound a bit paradoxical or daring to look into the coming months when this week we have received activity data for the month of April which clearly shows that its activity is losing momentum. but a close analysis These figures provide us with sufficient reason to be convinced.

Of Activity in April Perhaps most disappointing was the data on industrial production, which showed year-on-year growth of 5.6%, which would correspond to a contraction of 0.5% in month-on-month terms. But the decline in production reflects not so much underlying weakness as it is largely the result of a desire to reduce Excessive inventory levels.

for his part, he retail sales indicator which rose 0.5% overall month-on-month, showing the difference between much less spending on goods and a buoyant service charges And it continues without any sign of moderation. So this is a different growth from the past, in which there has been a huge increase in the consumption of services. Thus, during the five holidays in early May of the “Working Group”, Tourism spending surpasses 2019 level for the first time,

i.e, The rebound in activity in China is now being led by private spending in services, unlike in the past when it was driven by public investment in infrastructure. This implies a marked difference in the behavior of the economy which might lead us to believe that growth is not picking up. In case of a planned economy like China, the focus is on public drive infrastructure investment Used to have a very quick and strong effect on activity. In contrast, the consumption-led rebound will now be more gradual but self-sustaining, even as it gradually gains momentum throughout the year.

in China Additional savings accumulated by households during the pandemicUnlike the case in the United States, it is highly concentrated in high-income households. The jump in spending on services is explained by the fact that these households can finally spend whatever they want on leisure and entertainment activities and tourism. But this very specific spending, by supporting job creation in service sectors, will gradually improve other households’ incomes and filter through to a more general improvement in spending.

Thus, there is still room for the recovery in consumption to continue in the coming months and To be fed back with job creation. Additionally, given the vast expansion of university education over the past two decades, the system is producing many people because they have university degrees, a mismatch between expectations and reality, because many of the jobs that the economy is creating They are still manual. If working conditions for young people do not improve and do not match their expectations, the authorities will hardly resist the temptation to resort to their old manuals of incentives to work in the past, which are limited to infrastructure. increasing expenditure.

Due to all of the above, the growth of the Chinese economy in 2023 should be closer to the 5.5%-6% range than the official target of 5%, and this should also have knock-on effects for the region and the global economy. clearly visible in the second half of the year.