德银-新兴市场-新兴市场增长-20170920-Deutsche_Bank-EMEA_Snap_EM_growth_19页_1mb

EM Growth Summary

Core Content

This report from Deutsche Bank provides an analysis of emerging market (EM) growth trends and prospects up to the end of 2018. It outlines the factors contributing to the recent growth revival and highlights the challenges and opportunities ahead.

Main Points

• Growth Revival: EM growth has shown a robust recovery since 2016, driven by improving exports, a credit cycle upswing, accommodative developed market (DM) monetary policy, and easy fiscal and monetary policies within EM.
• Regional Growth Trends:
  • EMEA and LatAm: Growth momentum is expected to improve, with EMEA led by private consumption and LatAm showing a recovery.
  • Asia: Growth momentum has slowed, particularly in China and India, due to weak domestic demand and trade conditions.
• Macroeconomic Factors:
  • Credit Growth: Improved in EMEA and LatAm, with a significant increase in corporate leverage.
  • Debt Levels: EM debt has reached historical highs, with corporate debt increasing by about 33 percentage points since 2008.
  • Monetary Policy: EM policy rates are at the lowest since 2011, and monetary policy is expected to remain loose until mid-2018.
• Fiscal Policy: Fiscal spending as a % of GDP reached record highs in 2015 but has since declined. The policy space is limited in many EM countries.
• Structural Reforms: The report emphasizes the need for structural reforms to sustain growth, especially as global trade and easy monetary conditions may fade.
• Demographics and Productivity: Improving labor productivity and declining dependency ratios in EM countries are positive factors for future growth.

Key Information

• Global Trade: While trade has improved, it is unlikely to remain a strong growth driver due to the rise in trade protectionism.
• PMI Trends: The global composite PMI has accelerated, with EM PMI reversing its downward trend. However, PMIs alone are not a reliable leading indicator.
• Country-Specific Outlook:
  • China: Growth slowed in July due to weak property sector data. The outlook depends heavily on this sector, with a revised growth forecast for 2017 and 2018.
  • India: Growth has been below potential, with a significant downward revision in forecasts following disappointing GDP data.
  • Indonesia: GDP growth was stable but slightly below expectations. Export growth is expected to slow due to lower commodity prices and a stronger ringgit.
  • Malaysia: Growth has exceeded expectations, with a revised forecast due to strong domestic demand and a potential slowdown in Q4.
  • Russia: Growth increased to 2.5% YoY in Q2, with household consumption as the main driver. The outlook remains positive for 2017 and 2018.
  • Turkey: Growth improved slightly in Q2, with a revised forecast for 2017 and 2018. Credit and fiscal impulse remain strong.
  • Brazil: A consumption-led recovery has ended the recession, with a revised 2018 growth forecast due to positive consumption and employment data.
  • Colombia: Growth has bottomed out, with a reliance on policy stimulus. Investment is expected to improve in 2018 with infrastructure spending.

Structural Performance

• Structural Performance Indicators: A positive correlation between structural performance and real GDP growth is observed, with Asian economies like Hong Kong, Singapore, South Korea, and Taiwan leading.
• Weak Economies: Countries like Venezuela, Argentina, Brazil, and Ukraine are at the bottom of the structural performance rankings, indicating poor institutional quality and weak financial and goods markets.
• Policy Space: Limited fiscal and monetary room exists in many EM countries, with some showing signs of declining debt and increasing inflation gaps.

Conclusion

The report concludes that while EM growth has improved, the next phase of growth will depend heavily on structural reforms to capitalize on demographic and productivity benefits. The current growth momentum is expected to be supported by continued accommodative monetary policy and fiscal measures, but the long-term sustainability of growth remains uncertain without comprehensive reforms.