Emerging markets grow at slowest rate in six years, says IIF

Growth in emerging markets has fallen to its slowest pace in six years, returning to levels not seen since the aftermath of the global financial crisis, according to data released on Wednesday by the Institute of International Finance.

The IIF said average GDP growth across emerging markets fell to 1.6 per cent in the three months to the end of April compared with the previous three months, down from 1.9 per cent in the three months to March. "This suggests that EM growth in Q2 could turn out even weaker," the IIF said.

The figures follow a slew of recent data suggesting that growth and confidence are at post-crisis lows across the emerging world. But the IIF's survey did point to some signs of a recovery later this year.

The IIF said its EM Coincident Indicator - a compilation of 41 macroeconomic and financial variables - fell to its lowest level since the spring of 2009 in the immediate aftermath of the global financial crisis, continuing a downward trend observed since the third quarter of 2014.

The IIF's survey is the latest in a series of downbeat numbers for emerging markets. On May 7, EM Squared reported that capital outflows from EMs amounted to more than $600bn in the three quarters to the end of March, more than the $545bn of outflows seen in the three quarters to the end of March 2009, immediately after the crisis.

On Monday, Capital Economics said its latest GDP tracker - compiled from monthly data on output and spending - suggested that average GDP growth across EMs had fallen below an annual rate of 4 per cent in the first quarter. This, too, would be the slowest pace of growth since the 2008-09 crisis. Capital warned that average growth in EMs could fall to an annual rate of 3.5 per cent in the coming months.

The IIF said industrial output had been the biggest drag on growth, and that trade data for March and April continued to show broad weakness with only 1 out of 18 readings being positive. Business sentiment had declined sharply for the second consecutive month, wiping out gains registered at the start of the year.

But the IIF said financial market indicators had continued a recent upwards trend, led by a rebound in commodity prices.

"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," said Kristina Morkunaite, lead author of the IIF's report.

The downturn was strongest in Latin America, led by negative growth in Brazil. The pace of GDP growth was strongest in emerging Asia, although here, too, the IIF's indicator suggested the pace had slowed sharply.

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