Emerging Market GDP Growth On Track To Fall To 6-Year Low

May 13, 2015

Washington, D.C., May 13, 2015 - Emerging market GDP growth is on track to decline further in Q2 to 1.6 percent from 1.9 percent in Q1, according to the April update of the IIF's EM Coincident Indicator. This marks the weakest reading since spring of 2009.

"Emerging markets started Q2 on a very weak note, with a downshift in both real activity and business surveys," said Kristina Morkunaite, lead author of the report. "However, the pace of deceleration has at least eased, and a pickup in financial market variables provides grounds for cautious optimism that the downturn has now almost run its course."

The EMCI is extracting the common trend out of 41 macroeconomic and financial variables to estimate EM GDP growth on a monthly basis. For the April update, industrial production data was the biggest drag on the EMCI. Also, trade data for March/April continued to show broad-based weakness, with only 1 out of 18 readings that feed into the EMCI being positive, and business sentiment declined sharply for the second consecutive month, wiping out the gains registered at the start of the year.

On a more positive note, the IIF reported that the common trend among financial market indicators continued its recent upward trend, led by a rebound in commodity prices, providing cautious optimism for activity going forward.

The weakening in the EMCI is evident across all EM regions, but most notably in Latin America.

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The Institute of International Finance is the global association of the financial industry, with close to 500 members from 70 countries. Its mission is to support the financial industry in the prudent management of risks; to develop sound industry practices; and to advocate for regulatory, financial and economic policies that are in the broad interests of its members and foster global financial stability and sustainable economic growth. IIF members include commercial and investment banks, asset managers, insurance companies, sovereign wealth funds, hedge funds, central banks and development banks. For more information visit www.iif.com.

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