Emerging market growth lagging on job creation: IIF

ANKARA

While emerging from the shadow of the COVID-19 pandemic, emerging markets worldwide are not posting growth rates high enough to create enough jobs in the medium term, according to a global banking association.

"Beyond cyclical fluctuations, EM [emerging market] growth is on a secular [long-term] decline," warned a report by the Institute of International Finance (IIF), adding that growth will possibly stay bumpy until public vaccination against the virus is well underway.

Although these countries have long seen higher growth rates, emerging market growth has been in a long-term decline trend since the 2007-2008 global financial crisis, it said.

Emerging markets “may suffer from more structural headwinds to growth," the report stressed, adding the problem is more manageable in parts of Asia where growth still looks healthy, but elsewhere it is urgent.

The report cited Brazil, Mexico, and South Africa, for instance, as not seeing any productivity growth since the global crisis over a dozen years ago.

Emerging market countries like India have seen rising growth and rising job creation, but the report warned: "In several countries though, the growth rates of the last few years do not look compatible with a healthy job market."

According to the institute, weak growth can make income inequality worse and debt management harder.

"There will not be enough jobs for labor market entrants if EMs remain stuck in a low growth environment," it said.

The World Bank this month projected that developing countries would see 5% and 4.2% growth in 2021 and 2022, respectively.