Washington D.C., October 7, 2013 - The Institute of International Finance (IIF) today released a study analyzing the current state of emerging market economies and discussing steps that need to be taken to revitalize growth.

"Emerging markets face a receding sea of liquidity and rising interest rates as extraordinary monetary conditions normalize in post-financial crisis world," said Hung Tran, Executive Managing Director at the IIF. "This will not only remove a key source of stimulus to growth in emerging markets, but will highlight the critical need for structural reforms to improve growth potential in a number of countries."

"To revitalize growth, emerging economies will have to push forward a mix of reforms, ranging from relieving infrastructure bottlenecks to labor market reforms to enhancing business environments," said Charles Collyns, Managing Director and Chief Economist at the IIF. "Inertia and resistance to reform in many countries remains an obstacle to achieving the necessary changes to move toward more sustainable economic growth."

The study reached three broad conclusions:

• The recent weakening in emerging market growth is not just cyclical, but also reflects underlying structural factors, including a lack of reform during years of impressive growth performance.
• Revitalizing emerging market growth prospects will depend on advancing a broad range of interlocking reforms aimed at achieving better balanced and higher quality growth, based on refreshed growth models.
• The required mix of reforms and the new vision for growth will vary across countries, but in all cases will depend on being able to overcome internal political challenges.

The study analyzes the structural factors that are contributing to slow growth and finds that the slowdown, in part, reflects underlying fundamentals. Demographics in emerging market countries are becoming less supportive, as growth of working age populations slow and overall populations age. In addition, as emerging market economies become more developed and the gap between them and advanced economies narrows, the potential for rapid growth through adoption of advanced technologies becomes harder.

The study noted that the weakening of emerging market growth also reflects a slow pace of structural reforms. The study continued by saying the task ahead for emerging markets is to reinvigorate growth by adopting wide ranging and well integrated reforms to achieve better balanced and higher quality growth.

The study noted that the mix of reform priorities varies across countries, as shown in the study's 10 case studies, but the broad set of challenges can be grouped in six key areas:

• Reforms to open up monopolies in key sectors;
• Reforms to relieve infrastructure bottlenecks;
• Financial sector reforms to ensure adequate savings and stable provision of credit to dynamic parts of the economy;
• Labor market reforms to enhance flexibility and reduce informality;
• Fiscal reforms to ensure efficient and well-targeted public provisions of key services; and
• Business environments need to be enhanced.

The study noted that the slowness in reform is mainly due to political opposition rather than a lack of technical design.

The Institute of International Finance (IIF) is a global association of more than 470 financial institutions. Its mission is to support the financial industry in the prudent management of risks, including sovereign risk; the development of sound industry practices and standards; and the advocacy of regulatory, financial and economic policies that are in the broad interests of its members and global financial stability. Within its membership the IIF counts leading global banks, insurers, pension funds, asset managers and sovereign wealth funds, as well as leading law firms and consultancies. More information about the Institute of International Finance is available at www.iif.com.