The Broken Link Between Global Trade and Emerging Market Growth

Growing global trade is no longer going hand in hand with GDP growth in emerging markets, reports Dan Bogler for Financial Times. Investors have anticipated growth in developing economies, but instead, the pace is in decline since 2010 due to lower commodity prices, the rise in the US dollar value and slowing growth in China. Domestic factors including high debt contribute to the slower pace. “Most EMs sharply reduced interest rates during (and following) the crisis, so there is not much more they can do to make their currencies more competitive or to stimulate domestic consumption,” Bogler writes. Countries like Brazil, Malaysia and Indonesia have taken advantage of falling oil prices to reduce inefficient subsidies. Other structural reforms identified by Bogler include “reducing bureaucracy, improving education, deregulation and privatisation.” But such investments are difficult when citizens do not see immediate economic improvements. – YaleGlobal