The Economist April 30th 2022 65
Finance & economicsTheglobaleconomyRunning out of juice
E
merging economieshoping to grow
their way into the ranks of the rich have
faced a seemingly never-ending series of
setbacks in recent years. Trade tensions, a
pandemic, supply-chain snarls, inflation
and war have together dealt them serious
blows. Over the past three years more than
half the population of the emerging world
lived in countries where income growth,
in purchasing-power-parity terms, lagged
behind that in America—the first such epi-
sode since the 1980s.
The imfforecasts that economic output
across emerging markets will expand by
3.8% this year and 4.4% in 2023. Both fig-
ures have been revised down sharply since
last year and fall short of the 5% average
annual rate in the decade before covid-19.
As the contours of the post-pandemic
landscape start to come into focus, a lost
decade for the world’s poorer countries—a
period of slow growth, recurring financial
crises and social unrest—looks increas-
ingly plausible.
Emerging economies have experiencedmany ups and downs before. In the 1960s
and 1970s they enjoyed rapid growth,
which fed optimism about the prospects
for the world’s poor. But the good times
were followed by what William Easterly of
New York University described as the lost
decades of the 1980s and 1990s. Over the
ten years to 1990, annual growth in gdpper
person in the median emerging economy
fell below zero (see chart 1 on next page).
From the late 1990s onwards a new boom
began, whichreset expectations about the
economic potential of the developingworld. More recently, though, the pendu-
lum has swung back again, and growth has
proved harder to come by. Emerging mar-
kets face structural impediments, such as
tougher financial-market conditions and
changing trade patterns, reminiscent of
those that confronted them in the 1980s
and 1990s.
Financial pressures pose the most
acute threat. In the early 1980s the Federal
Reserve raised interest rates dramatically
as it sought to tame inflation. For poor
economies that had borrowed heavily in
the preceding years, the ensuing tighten-
ing in financial conditions and strength-
ening of the dollar were too much to bear.
Waves of debt and banking crises followed.
Some of those conditions seem familiar
today. Both public and private debt in the
emerging world rose steadily as a share of
gdpduring the 2010s, and rocketed during
the pandemic. Public-debt ratios across
middle-income economies now stand at
record highs, and indebtedness in the
poorest countries has risen towards the de-
bilitating levels of the 1990s. Of the world’s
70-odd low-income countries, more than
10%, including Chad and Somalia, already
face unsustainable debt burdens. Another
50%, including Ethiopia and Laos, are at
high risk of being in a similar position, ac-
cording to the World Bank. A decade ago
only about a third of poor countries were
in, or at high risk of, debt distress.
Russia’s invasion of Ukraine has fuelledWASHINGTON, DC
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