Key Themes » The Golden Age for Emerging Markets is Over
5 October 2021

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The coronavirus crisis is likely to accelerate some of the structural trends already underway that are weakening emerging markets’ longer-term growth prospects.

This Key Theme, which collects research from across our services, explains why the 2000s were an aberration for growth in emerging markets, and why the coming decades will be much slower.

Top Reads

Emerging Markets Economics Update

Five years on from the “End of a Golden Age”

How well does our original analysis stand up?

18 August 2021

Emerging Markets Economics Focus

The end of the Golden Age

The 2000s look more like an aberration. Expect slower EM growth in the coming decades.

13 October 2016

Emerging Asia Economics Focus

Weaker growth is here to stay

Why we think Emerging Asia will be growing only slowly at the end of this decade.

12 June 2019

Our View

Rapid EM growth in the 2000s and early 2010s was a one-off. And headwinds to EMs’ prospects are building:

  • Some EMs may face a permanent loss of output from the coronavirus crisis.
  • US-China decoupling is accelerating. EMs were the big winners from the wave of globalisation in the 1990s and 2000s. By the same token, they will be the big losers from the end of globalisation.
  • China’s policy response to the coronavirus crisis will exacerbate the country’s misallocation of resources, and cement the economy’s structural problems.

Over the next decade, China’s trend rate of growth will slow to just 2%, while India will lead the pack. Poorer EM regions (Africa and Asia) are likely to experience faster growth than richer EM regions (Emerging Europe and Latin America).

Real GDP (% y/y, Average)

In aggregate, we expect EM GDP growth to ease from an average of 5.5% in the 2000s and 2010s to around 3.5% in 2020-2040. Growth will still be faster than that in the developed world. But incomes will converge more slowly than previously.

This slowdown need not in itself be bad for the rest of the world. That said, given China’s high debt level, there is a risk that its adjustment to slower growth is not a smooth one.

There are geopolitical implications too; if we are right in expecting China’s growth rate to slow, assumptions that China will overtake the US to become the world’s biggest economy will be proved wrong.

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Key Themes

Are we facing the end of globalisation – and does it matter?

COVID-19 has emerged as the most serious challenge to the wave of globalisation which has been underway since the 1990s. The pandemic has led to calls for new restrictions on flows of trade, capital and people and has increased strains between the US and China.

Economies After COVID

Most economists agree that the pandemic will deliver a lasting blow to output and the global economy will be substantially smaller by the end of this decade than would otherwise have been the case. However, we suspect that some of this pessimism about the long term is not only overdone, it misses the point.

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