Emerging Markets: Recipe for a Sustainable Growth

After a bullish performance for more than the last decade, the emerging markets are again slowing down due to external pressures exerted by the global markets. Their aggressive growth was fueled by strong commodity prices, thanks to double digit growth of China compounded by easy and cheap capital partly due to low interest rates in the West after 2008 slowdown.

Now with China’s growth crimped and western monetary dynamics changing, the emerging markets have to readjust. However, due to reforms enacted after monitory meltdown of 1990s, today the emerging markets are more resilient to withstand external global market pressures. But they still need a sound long term strategy to withstand the ever changing global markets.

  • One sure way to absorb such global shocks is for individual emerging market countries to develop an economy based on a combination of exports and in-country consumption of goods produced.
  • Secondly, they should invest in RnD to produce synthetic materials from locally available resources, thereby shielding the economy from fluctuating commodity prices. In today’s technical / digital world, such RnD research is accessible and readily available.
  • Thirdly, the emerging markets also need to promulgate structural reforms and “safe” liberalization policies for long term growth.

 

Shabnam Lutafali, Ph.D.

Visiting Assistant Professor Economics

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