ROUBINI AND BREMMER: Welcome To The 'New Abnormal' Where Emerging Markets Will Fail To Emerge

tom keene nouriel roubini ian bremmerIan Bremmer, Nouriel Roubini and Bloomberg’s Tom Keene

We’ve reached the “New Abnormal,” an era marked by slow growth, austerity fatigue,  and partisan gridlock.

This is how Ian Bremmer and Nouriel Roubini describe the economy in a new piece in Institutional Investor.

And the New Abnormal is bad news for markets.

Bremmer and Roubini warn that ongoing global deleveraging and a dearth of structural reform will mean anemic economic growth and high unemployment for the foreseeable future.

But the most volatile aspect of the New Abnormal is the reliance for growth in emerging markets, they write:

In short, some emerging economies will fail to fully emerge, particularly given the relative immaturity of political and financial institutions in some of them and the fact that many of their governments have used recent successes as an excuse to postpone the reforms needed to lift them to the next stage of development. The risks that individual emerging markets may pose are compounded because they increasingly depend on commercial relations with one another. Trade among the BRICS has grown by more than 1,000 per cent over the past 10 years, and all five member nations are now grappling with economic slowdowns.

Of course, some emerging markets are more promising than others.

Bremmer and Roubini identify the best “medium-term” EM bets thanks to popular elected leaders with demonstrated commitment to making tough-but-investor-friendly changes.

  • Brazil
  • Chile
  • Colombia
  • Malaysia
  • Mexico
  • The Philippines
  • Turkey

However, Bremmer and Roubini write that other shock-prone EM countries will underperform due to unsure political footing. They include:

  • India
  • Peru
  • South Africa
  • Thailand

Russia and China are even more complicated, according to Bremmer and Roubini. Russia’s lack of new ideas continues to drain the public’s patience. And while China has a ruling class capable of restructuring the economy, it remains unclear whether they can successfully do so.

Read the whole piece at Institutional Investor>

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