Emerging economies risk “leading the world economy into a slump”, with lower growth and a rout in financial markets, according to the latest Brookings Institution-Financial Times tracking index.
Released ahead of the annual meetings of the International Monetary Fund and World Bank in Lima, Peru, the index paints a much more pessimistic outlook than the fund is likely to predict later this week.
According to Eswar Prasad of Brookings, weak economic data across most poorer economies has created “a dangerous combination of divergent growth patterns, deficient demand, and deflationary risks”.
Christine Lagarde, IMF managing director, said last week that the global economic patterns were “disappointing and uneven” with weaker growth than last year and the forecasts published on Tuesday showing only a “modest acceleration expected in 2016”.
The fund’s reasonably sanguine view stems from an expectation that China will succeed in transforming its economy slowly from investment and manufacturing towards consumption and services.
By contrast, the Brookings-FT index, which summarises the latest figures, suggests the downturn is more serious alongside “sharp divergences in growth prospects between the advanced economies and emerging markets, and within these groups as well”.