What are the drivers of growth in different emerging markets?

Question

What will be an ideal response?

Answer 1

Many of the EM countries have faced severe economic crisis in the 1990s and had to implement new policies ensuring better conditions and better financial systems. As a result, EMs started to go through structural reforms in an attempt to create stability and growth. Often governments implemented wide-ranging economic reforms, adopted stricter fiscal policies, reduced the external debt, and brought inflation under control. Due to such reforms, many EMs have stabilized their economies and started growing rapidly. As EMs adopt relatively open approaches to world trade, they integrate further into the global economy.

Liberalization, rapid economic growth, as well as increased improvements in the business environment, have attracted significant levels of foreign investments to many EMs. EMs have been contributing to global trade at growing rates as they increasingly integrate into the world economy. In fact, when compared to developed countries, the trade volumes of emerging market countries are growing at significantly faster levels. Movement from import substitution policies towards export--led growth policies has led to increased trade and foreign investment in many emerging markets and can be identified as a major driver of growth. Such growth is further fuelled by increasing numbers of free trade agreements signed.

Another driver of growth is many EMs is the reallocation of resources leading to increased investment and focus on value-added activities. Hence many are able to move upmarket in manufactured products or have developed significant manufacturing capabilities. In many EMs industrial growth and increasing commodity prices led to higher revenues which were directed to the economy to boost domestic consumption. In such cases, EMs were able to take advantage of the opportunities of having large populations resulting in large domestic markets.