Conclusion: Seven of ten of the largest emerging market economies are tightening monetary policy.
In the table below, we’ve outlined the largest ten emerging market economies, their 2009 GDP, their most recent CPI reading, and the current monetary stance of their federal banks. To say that emerging markets are leaning towards tightening their monetary policy, which will lead to slower growth, is an understatement. Some key takeaways:
- In aggregate, the ten largest emerging market economies represent ~$12.7TN in GDP, which is ~21% of global GDP and the fastest growing portion of global GDP;
- The current average CPI reading for this collection of economies is 6.3%, and only Poland has a reading below 4%; and
- Of the 10 economies, 7 are currently tightening, 2 are neutral and likely to tighten, and 1 is loosening (albeit in the face of 5%+ inflation).
In sum, the emerging markets see inflation, are tightening policy, and this doesn’t bode well for the slope of global growth.
Daryl G. Jones