Chart of the month: Emerging markets’ lost year of export growth

Export growth has long been an engine for overall economic growth for a large number of emerging markets. But in 2015, export volume growth for emerging markets has been terrible, as the graph below demonstrates.

For the eight months of data in 2015, year-on-year growth has averaged just 1.3% in emerging markets, compared to 2.7% in advanced economies. In addition, five of the eight monthly year-on-year growth rates in 2015 have been negative in emerging markets.

A closer look at the figures reveals that the blame can largely be attributed to emerging Asia. For the eight months of data for 2015, monthly year-on-year growth has averaged -0.4%, and this is flattered by strong growth in January and February. From March-August, growth has averaged a disastrous -3.3%.

Note: The chart measures merchandise export volume growth (growth in the value of exports when prices are held constant over time). Data has been seasonally adjusted and is measured monthly. The growth rates correspond to year-on-year growth rates.

Such a poor export performance by emerging markets is very uncommon. As is obvious from the graph, emerging economies’ export volumes almost always grow at a faster rate compared to advanced markets.

The main question that follows is how long will this slump persist? Not long, if the IMF’s latest economic forecasts (released in October) are anything to go by. It predicts that emerging market export volume growth in 2016 will be 4.6%, exceeding advanced economies’ figure of 3.1%. In fact, it predicts that emerging markets will enjoy superior growth from 2017 to 2020.

So will it be back to business as usual? Not exactly. According to IMF data, from 2000-2010, the percentage point difference between emerging markets and advanced economies export volume growth was 3.4. From 2011-2015, it narrows to 1.4. For 2016-2020, the forecast shrinks the figure to 1.1. At best, the gap in export performance is narrowing. A more extreme conclusion would be that the gap is sufficiently small as to be insignificant, and that the years of emerging market export growth beating out advanced economies are practically over.