PH, emerging marts to benefit from US growth

MANILA, Philippines—The United States’ economic recovery is expected to lead to higher growth in emerging markets around the world, offsetting the effects of tighter financing conditions as global interest rates start to climb.

The International Monetary Fund (IMF), in its semiannual World Economic Outlook (WEO) report, said that a strong US economy would offset the higher cost of money in the coming months. But the multilateral lender warned that unexplainable bouts of volatility in financial markets, similar to swings observed in the middle of 2013, could affect emerging markets.

“On the one hand, if external changes are dominated by a strong recovery in advanced economies, this will, overall, benefit emerging markets despite the accompanying higher US interest rates,” chapter IV of the IMF’s first 2014 WEO said.

“However, if external financing conditions tighten by more than can be explained by the recovery in advanced economies, as observed for some emerging market economies during the bouts of market turbulence in the summer of 2013 and the beginning of 2014, emerging markets will suffer,” it added.

The IMF’s WEO analyzed growth patterns of the world’s 16 largest emerging markets, namely, Argentina, Brazil, Chile, China, Colombia, India, Indonesia, Malaysia, Mexico, Philippines, Poland, Russia, South Africa, Thailand, Turkey and Venezuela.

These 16 economies accounted for 75 percent of the world’s gross domestic product (GDP) in 2013, the IMF said.

It found that a one percentage point increase in US GDP growth would, on average, result in a 0.3-percentage point acceleration growth of these smaller economies.

The IMF said most emerging economies could see growth slow down if financial markets continue to defy logic. This would lead to higher interest rates, raising the cost of money that governments and companies need for job creation.—Paolo G. Montecillo