A global fund manager has forecast a slowdown in the economic growth of emerging markets over the next 10 to 15 years, but expects a more favourable outlook for developed economies over the same period.
With regard to emerging markets, JP Morgan Asset Management global strategist Patrik Schowitz said there were two key factors that would result in a more challenging economic environment for these regions.
“One is demographics. Population growth is slowing down and that is a headwind to [economic] growth across any number of emerging market economies. So I don’t think there is actually any reason to particularly single anyone out. It’s a widespread phenomenon,” Schowitz noted during a presentation of the manager’s “2022 Long-Term Capital Market Assumptions” report.
He nominated China’s convergence towards developed market economies as the other key driver of emerging markets’ predicted performance in the medium term.
“[As a result], it’s only natural that China will continue to slow down over the next decade or so,” he said.
According to Schowitz, the outlook for developed markets is more optimistic for the same time horizon.
“We’ve actually upgraded our [forecast for] developed market growth a little bit. It is because we actually think there are finally some signs of life in the productivity data – technological progress,” he revealed.
“Let’s face it, we’ve all been forced to adapt [to different elements over the past few years] and there will be some dividends paid from that.
“So it’s actually a fairly upbeat message on a global view.”
He said inflation was likely to be higher over the next 10 to 15 years as some of the underlying trends in the economy over the previous economic cycle, such as fiscal policy and income distribution, have changed.
Further, he pointed out the new focus on environmental, social and governance issues would also have an inflationary effect.
“If you think about the environmental angle, [you have to wonder] to what degree will that actually add to costs and add to inflation. We think a little bit and it’s one of the reasons we have actually raised our inflation [expectations],” he said.''