India and Mexico are enjoying robust growth even as emerging economies as a whole are facing the harsh reality of slow growth and reversal of capital flows, IMF chief Christine Lagarde said Thursday.
Washington: India and Mexico are enjoying robust growth even as emerging economies as a whole are facing the harsh reality of slow growth and reversal of capital flows, IMF chief Christine Lagarde said Thursday.
She said slow growth in China, decline in commodity prices and asynchronous monetary policies are among the challenges faced by the emerging economies.
In remarks prepared for delivery at the University of Maryland, Lagarde said that after years of success, however, emerging markets as a group are now facing a new, harsh reality.
"Growth rates are down, capital flows have reversed, and medium-term prospects have deteriorated sharply," she added.
According to Lagarde, emerging markets are a group of about 30-50 countries that are in a transition phase - not too rich, not too poor, and not too closed to foreign capital, with regulatory and financial systems that have yet to fully mature.
"These countries are incredibly diverse - culturally, geographically, and even economically. Right now, for example, Brazil and Russia are in recession while India and Mexico are enjoying robust growth. So, it would be a mistake to think of these countries as a homogeneous bloc," she noted.
Last month at the World Economic Forum (WEF), Lagarde had said that as India is growing fast at over 7 percent, the nature of BRICS bloc has undergone a major change, with each member showing an economic performance very different from the other.
Emerging and developing economies account for about 60 percent of global GDP, up from just under half only a decade ago.
"They contributed more than 80 percent of global growth since the 2008 financial crisis, helping save many jobs in advanced economies, too.
"And they have been the main driver behind the significant reduction in global poverty," Lagarde said today.
According to Lagarde, softening of growth, scale of capital outflows and recent stock market declines are cause for concern in the short term.
Going by estimates, emerging markets saw USD 531 billion worth net capital outflows last year compared with USD 48 billion net inflows in 2014.
"The emerging world is also facing increasing geopolitical and environmental risks. Think of the Syrian refugee crisis that is directly affecting countries such as Turkey, Lebanon and Jordan, which are hosting millions of displaced people," the IMF chief said.
Talking about the impact of climate change on food prices, political stability and people's health, Lagarde said that by 2030, "it is expected that more than 98 percent of deaths related to climate change will occur in developing countries".
On quota reforms, Lagarde said implementation of quota reforms at IMF has bolstered its ability to bring emerging and advanced economies together in a new partnership for growth.
"For the first time in history, emerging market countries such as Brazil, China, India, and Russia are now among the 10 largest shareholders of the Fund," she added.
"The bottomline is that today's IMF more accurately reflects the dynamics of the 21st century's global economy, including the role of emerging markets," an IMF statement said quoting Lagarde.
Meanwhile, the European Commission today said India is consolidating its position as the world's fastest growing large economy.
"In China, the relatively smooth structural adjustment assumed in the central scenario over the forecast horizon is consistent with a gradual slowing in the country's officially reported GDP growth from 6.9 percent in 2015 to 6.2 percent in 2017. However, it is surrounded by major risks.
"The outlook for the rest of emerging Asia remains broadly stable as compared to the autumn forecast. India is consolidating its position as the world's fastest growing large economy, with the rest of the region remaining closely tied to China," it said.
Indian economy is projected to see a real GDP growth of 7.4 percent this year and 7.5 percent in 2017, as per the report.
In its Winter 2016 Economic Forecast, the Commission said Europe's economy is now entering its fourth year of recovery while growth continues at a moderate rate.