P6-2_Emerging_markets_cannot_save_the_world - will still be...

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Emerging markets cannot save the world By Mark Williams Strong growth in emerging market economies over the next few years will not be enough to rescue the rest of the world, says Mark Williams, senior economist at Capital Economics. He says that for EM nations to pull the developed world out of its malaise, there will have to be significant growth in import demand from the likes of China and the oil producers. “Put another way, the emerging world’s current account surplus needs to fall,” he says. “In the near term, at least, this looks unlikely.” Mr Williams says that in China, imbalances are rebounding and powerful vested interests are likely to frustrate efforts at rapid reform. He adds that the prospects for rebalancing elsewhere in Asia are better, but that it
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Unformatted text preview: will still be a slow process – and unless commodity prices drop sharply, oil producers’ surpluses look here to stay. He acknowledges that other parts of the emerging world – such as Brazil, Mexico and Poland – are likely to boost global demand in coming years. “But while this could provide a degree of support for the developed world, it is unlikely to have much impact if the surpluses of Asia and the oil producers remain large,” he says. “And there are risks, most notably of overheated growth and asset price bubbles, in emerging market deficit economies. “Meanwhile, G7 policy-makers will continue to ask whether their emerging world counterparts should not be doing more to expand global demand.”...
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This note was uploaded on 05/02/2011 for the course FINANCE 9924603 taught by Professor Ssgdbfb during the Spring '11 term at Kyung Hee.

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