Emerging Markets Take the Reins

March 08, 2023 | Julia Sheehan, Associate Research Analyst

Following a year of heightened volatility, stubborn inflation, and intense monetary tightening, global economic growth is expected to slow in 2023 and remain below trend in 2024. Based on the IMF’s forecast, global growth during that period is expected to be driven by emerging markets and developing economies.

The two countries projected to see the strongest economic growth are China and India, with China forecasted to grow 5.2% in 2023 and 4.5% in 2024, and India 6.1% and 6.8%, respectively. China is one of the world’s largest economies and is rebounding following three years of strict COVID policies. However, a number of risks plague investors, including regulatory and governance issues as well as geopolitical concerns. Additionally, China, a leader in lower-cost labor and manufacturing, is facing an aging population and declining workforce, with the country experiencing a net population decline in 2022 for the first time in decades. India, with a population that is expected to surpass China’s this year, is projected to become the world’s third-largest economy and stock market in the coming decade. Optimism surrounding the Indian economy can be attributed to its ongoing structural reforms, tariff negotiations with the West, young and growing population, and robust domestic demand. These factors have helped India weather the storm of recent economic uncertainty better than other emerging markets. As the world is projected to enter a period of slower economic growth, investors will benefit from remaining well-diversified as inevitable bright spots emerge with the ever-changing composition of the global economy.

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