Global economic growth is accelerating. After registering the slowest pace since the 2007-2009 financial crisis in 2016, global growth is expected to rise to a 2.7 percent pace this year and 2.9 percent over 2018-19.
While much has been said about better economic news from the major advanced economies, the seven largest emerging market economies—call them the Emerging Market Seven, or EM7 – have been the main drivers of this anticipated pickup.
The contribution of the seven largest emerging market economies to global output has climbed substantially over the last quarter century.
The EM7 -- Brazil, China, India, Indonesia, Mexico, Russia and Turkey – accounted for 24 percent of global economic output over 2010-2016, up from 14 percent in 1990s. Although this is a smaller share than the Group of Seven major industrialized economies, the G7’s portion of global economic output has narrowed to 48 percent from 60 percent over the same time frame.
The EM7 have outpaced the G7 in terms of their contribution to global growth.
The EM7 account for an ever-more significant share of the expansion of the global economy. In 2016, the EM7 were responsible for 1 percentage point of the 2.4 percent growth rate of the world economy, while the G7 contributed 0.7 of a percentage point. This was a substantial pick up from 2000, when the G7 contributed 2.2 percentage points of the world’s 4.4 percent growth rate, while the EM7 were responsible for 1 percentage point of the expansion. (1990-99 global growth average: 2.6 percent; 2000-08 average: 3.3 percent; 2010-16 average: 2.9 percent.)
EM7 growth is forecast to be considerably stronger than G7 growth in near term.
Economic growth in the EM7 is forecast to turn up sharply to 4.8 percent in 2017 and continue to accelerate to a 5.1 percent pace next year, above the 1990-2008 average for this group (4.8 percent). The G7 are expected to grow at a faster 1.8 percent rate this year, but stabilize as central banks ratchet back monetary policy accommodation, and expand at a 1.7 rate in 2018, below the 1990-2008 average of 2.2 percent.
EM7 growth has beneficial growth effects globally and in other emerging and developing economies – though not quite as much as more robust G7 growth.
A 1 percentage point growth increase in the EM7 is associated, after two years, with a cumulative 0.9 of a percentage point stronger growth in other emerging market economies and with a 0.6 of a percentage point faster expansion globally. The same increase in growth in the G7, thanks to their larger output, would boost emerging market growth by 1.4 percentage points and globally by 2 percentage points over the same period.
The largest emerging markets are becoming more dominant trading partners among emerging market and developing economies.
In 2016, the EM7 accounted for 52 percent of goods exports among among emerging market and developing economies, up from 44 percent in 2000. China played a big role in this expansion, claiming 18 percent of goods exports among emerging and developing economies in 2016, up from 14 percent in 2000.