China slowdown adds to emerging market growth hurdles: IMF

Washington: The emerging markets, increasingly dependent on China for their own growth, may suffer as the world’s second-largest economy decelerates, International Monetary Fund (IMF) said on Thursday.

“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 on Thursday.

“Market turbulence in mid-2013 as the US Federal Reserve weighed the tapering of its bond-buying programme 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 on 8 April.

“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 former Fed Chairman Ben Bernanke indicated in May 2013 that the central bank might start curtailing its bond purchase programme.

“China’s recent economic slowdown accounted for about a quarter of a 2 percentage point decline in average emerging market growth since 2012 compared with the 2010-2011 period,” the Washington-based fund said.

China’s targets

China targets growth of 7.5% this year after the economy expanded 7.7% in 2013 and 2012 and 9.% in 2011. “The IMF expects modest improvements for the global economy this year and next after an expansion of about 3% last year,” the fund’s managing director Christine Lagarde said on Wednesday.

IMF forecasts released in January estimated an expansion in developing countries of 5.1% in 2014 from 4.7% in 2013.

In a separate chapter released on Thursday, 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. Bloomberg