Emerging economies seen back in the growth path by 2011
24 Jul 2009
Emerging economies, including India, are set to return to the sustained growth trajectory by 2011 because of the growing domestic demand even as the downturn in the developed economies is likely to continue for the next several years, a report has said.
The economic downturn in emerging markets will be short-lived and many of these economies are expected to see a rapid return to sustained growth by 2011, Deutsche Bank Research said in a report.
Thanks to solid economic fundamentals, the Emerging Market-6 (Brazil, China, India, Korea, Mexico and Russia) have been (or will be) able to engineer a more or less rapid recovery by boosting domestic demand, the report said.
Deutsche Bank Research, however, do not expect the emerging economies to see high growth rates due to permanently weaker global demand and hence weaker export growth.
In contrast, economic growth in the developed economies will likely be anaemic for several years to come due to continued de-leveraging in the household and banking sector, the report said.
The report attributed emerging markets' limited dependence on foreign capital flows, large interest-rate differential as against developed markets and their capacity to limit the risk of significant currency depreciation and inflation as reasons for sustained growth momentum.
"The EM-6 banking sectors remain, for the most part, sufficiently well capitalised to support an increase in credit growth. Lower interest rates therefore by and large remain an effective tool to support domestic credit growth and investment," DB Research added.
The report, however, discounts the prospects of the domestic demand-led growth in the EM-6 helping to pull the world economy out of the doldrums.
