The Crisis Impact on Emerging Economies: What lessons can we draw from it?
For the first time, developing countries have come out of a systemic crisis stronger than they entered it. Indonesia, Brazil and Vietnam have maintained almost unwavering growth trajectories. China has resumed a growth pattern between 7% and 8%.
What lessons can be drawn from this recent experience? How does the South look at its future?
Karim El Aynaoui, Director of Research and International Affairs, Bank Al Maghrib
“We cannot think of a world growing at 2 speeds. At some point, demand and supply need to match at the global level”.
Dr. Okkorie A. Uchendu, Director of the Monetary department, Central Bank of the Federal Republic of Nigeria
“To make a difference in terms of crisis, resources need to be pooled. Combined, all African central banks have about 450 billion US$ of reserves”.
Alex Trepelkov, Director, Financing for Development Office, Department of Economic and Social Affairs, United Nations
Preya Sharma, Head of emerging markets, UK Treasury
Michel Juvet, Member of the Board, Bordier Bank
“The G20 is a Facebook for the superpowers”.
Alexandre Kateb, Professor at Sciences Po Paris, economist, essayist, managing director of Compétence Finance
Fatine Layt, President of Oddo Corporate Finance
Strong resistance of the South
Exchanges among central bankers from the South have put to light how much initial economic conditions matter. A country’s economic and financial position is crucial in determining its leeway when the crisis hits.
In this respect, developing countries over the board were doing extremely well. With good fiscal sustainability, low inflation and public debt, high reserves and solid current account balances, the conditions were there to fight off macroeconomic instability.
Of course, with a strong elasticity between developing and developed economies (for instance, growth elasticity is .4/.5 between Morocco and the European Union), the growth effect still hit hard.
The way ahead
No man is an island. The same goes for economies. Insurance at the individual level is costly. If every country – chief among which China – continues to accumulate reserves to insure itself from capital flows or the vagaries of the international business cycle, the cost borne by the international economy is going to be tremendous.
African countries need to integrate more and make the most of economies of scale. For the time being, its economies are weak and fragmented. By pooling their foreign exchange reserves, the combined reserves of African central banks would amount to some 450 billion US$. The idea of setting up an African Central Bank to this effect, leaning on Africa’s regional Central Banks, has also been brought up.
Finally, beyond the level of reserves, it is the importance of policy coordination that has been pointed out.
The Chiang Mai initiative among 10 of the ASEAN members to manage regional, short-time liquidity problems could be role model. But the South explicitly recognizes the impetus for finding a global insurance mechanism within the international framework. Evolutions in the governance of multilateral institutions like the IMF have been widely acknowledged as a first step in the right direction.
