A synchronous growth slowdown has beenunderway in emerging markets (EM) since 2010. Growth inthese countries is now markedly slower than, not just thepre‐crisis average, but also the long‐term average. As agroup, EM growth eased from 7.6 percent in 2010 to 4.5percent in 2014, and is projected to slow further to below 4percent in 2015. This moderation has affected all regions(except South Asia) and is the most severe in Latin Americaand the Caribbean. The deceleration is highly synchronousacross countries, especially among large EM. By 2015, China,Russia, and South Africa had all experienced threeconsecutive years of slower growth. The EM‐AE growthdifferential has narrowed to two percentage points in 2015,well below the 2003‐08 average of 4.8 percentage points andnear the long‐term average differential of 1990‐2008. Therecent slowdown in EM has been a source of a lively debate,as evident from the quotations at the beginning of thisnote. Some economists paint a bleak picture for the futureof EM and argue that the impressive growth performance of EMprior to the crisis was driven by temporary commodity boomsand rapid debt accumulation, and will not be sustained.Others emphasize that a wide range of cyclical andstructural factors are driving the slowdown: weakeningmacroeconomic fundamentals after the crisis; prospectivetightening in financial conditions; resurfacing ofdeep‐rooted governance problems in EM; and difficultyadjusting to disruptive technological changes. Still othershighlight differences across EM and claim that some of themare in a better position to weather the slowdown and willlikely register strong growth in the future. This policyresearch note seeks to help move the debate forward byexamining the main features, drivers, and implications ofthe recent EM slowdown and provides a comprehensive analysisof available policy options to counteract it.
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