Guest post: Ignore the naysayers – EM’s long-term prospects are still strong | beyondbrics

Guest post: Ignore the naysayers – EM’s long-term prospects are still strong | beyondbrics:

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It has been a difficult year for emerging market economies, policy makers and investors. A slowdown in the global economy has dented activity across many emerging economies. But despite the recent headwinds, there is an impressive long-term growth story that shouldn’t be ignored, especially when set against the challenges other regions have faced in recent years.

Many commentators have been quick to point to the overall slowing of emerging market growth as evidence of fragility. Even China, the world’s largest commodity importer, appears to be in the doldrums with rampant credit creation and the activities of the shadow banking sector creating significant structural challenges.

Like other emerging markets, China is also transitioning from an investment-led economy to one driven by domestic consumption. This has proved a bumpy road at a time when the middle income trap and loss of the demographic dividend looms large. And the authorities seem wary of implementing large-scale fiscal stimulus for fear of stoking inflation in an economy where the credit to GDP ratio stands at a dangerous 200 per cent."

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