Major growth divergence across emerging markets in 2024: S&P Global

“We continue to expect 2024 to show significant growth divergence across emerging markets (EMs). Growth outperformers in 2023 (such as Brazil, Mexico, and India) will experience moderate deceleration in growth rates in 2024, although their growth will remain relatively strong. Conversely, last year's growth underperformers (among them Chile, Colombia, Peru, Thailand, Hungary, Poland and South Africa) will experience modest acceleration in growth in 2024,” S&P Global said in a note.

In the coming quarters, EMs will continue to encounter risks to growth, including the lagged impact of high interest rates and an expected deceleration in US economic growth, it observed.

Policy-related risks have risen following electoral outcomes that generate uncertainty over reforms, fiscal trajectories and institutional frameworks in several EMs.

Most EMs' growth will strengthen in 2024, mainly due to strong domestic demand.  In most EMs, unemployment rates remain near record lows, helped by the recovery from the COVID-19 pandemic and in most cases by fiscal support. This has pushed consumption past pre-pandemic levels in all EMs.

Trade weakness has bottomed out.  However, further improvement remains highly vulnerable to setbacks. EMs with strong trade ties with advanced Europe are benefiting from a modest recovery in household spending, with positive effects on manufacturing production.

Manufacturing sectors in emerging Asia, especially those exposed to the improving electronics trade cycle, are also recovering.

Continued strength in U.S. demand is also helping manufacturing production in several Latin American economies.

However, the expected deceleration in US growth and the lagged impact of high interest rates across other advanced economies mean that the speed and duration of trade cycle improvement are far from assured, noted S&P Global.

A later-than-anticipated start to interest rate cuts by the US Federal Reserve (Fed) will contribute to slower monetary policy normalisation in most major EMs, though the rating agency’s view on terminal benchmark interest rates remains unchanged. It now expects Fed funds rate cuts will start in December this year and last into late 2026. Disinflation continues across EMs.

S&P Global’s 2024 real GDP growth forecast for EMs excluding China remains unchanged at 3.9 per cent, following a 4.2-per cent expansion in 2023. However, it adjusted its 2024 GDP growth forecasts for several countries.

It made the largest upward revisions to Turkiye (plus 50 basis points) and Chile (plus 40 basis points), in both cases due to stronger-than-expected first-quarter GDP reports.

It lowered its growth projections the most for Saudi Arabia (minus 70 basis points), Thailand (minus 50 basis points) and South Africa (minus 40 basis points).

Its 2024 real GDP growth forecast for Latin America remains unchanged at 1.2 per cent (or 2 per cent excluding Argentina), although it revised expectations for several countries.

It made no major changes to its 2024 growth forecasts in Southeast Asia, except in Thailand, where lower-than-expected first-quarter GDP growth prompted the rating agency to lower its projection to 3.5 per cent from 3.9 per cent. It forecasts growth for the region at 4.8 per cent compared with 4.4 per cent in 2023.

Inflation is controlled in emerging Asia overall. Some economies are facing inflationary pressure from food prices, but core inflation is contained across the region, it added.

Fibre2Fashion News Desk (DS)