Emerging Markets Gloom May Be Overdone, Panel Says

IMF’s David Lipton sees “huge growth potential”

Countries can accelerate growth with appropriate policies

Panelists discuss outlook for oil, impact of further interest rate increases by U.S. Fed

“When you’re at the crossroads and you’re just looking at the intersection, it can all look pretty dark,’’ said David Lipton, IMF First Deputy Managing Director. Still, “there’s huge potential for emerging countries to grow rapidly and be the engine of growth for the global economy,’’ he told participants at the seminar, Emerging Markets at the Crossroads.

Lipton’s comments came after the IMF, in its World Economic Outlook released this week, cut its forecasts for global growth amid deeper-than-projected contractions in Brazil and Russia, a continuing slowdown in China, and a sharp drop in the prices of oil and other commodities.

Emerging nations “need technology, they need investment, they need to educate their populations—that will make production grow,’’ Lipton said.

“There is no reason countries can’t accelerate growth with the right policies and the right international environment,’’ he said. “Part of it comes back to the role of the IMF and the role of the international monetary system. We need a world environment in terms of capital flows that’s encouraging rather than discouraging of emerging market growth.’’

No one answer for emerging market countries

Other participants, including officials from Argentina and Russia, agreed that, while emerging markets face risks, including the prospect of further interest rate increases by the U.S. Federal Reserve, many are well placed to withstand them. What’s more, while some countries, including Russia, have been hurt by declines in oil prices, others have benefited.

Ksenia Yudaeva: “We need to think about how to decrease volatility to increase growth” (IMF photo)

“There is no one answer for all kinds of countries right now,’’ said Ksenia Yudaeva, First Deputy Governor of the Bank of Russia. She said the outlook for Russia is improving as the oil and natural gas exporter adjusts to lower energy prices, and that the central bank may raise its forecasts for growth. “The economy is probably doing better than we expect,’’ she said. “So I already think that maybe we will be revising them upward.’’

The IMF cut its outlook for Russia this year, projecting the economy will shrink 1.8 percent, compared with a forecast for a 1 percent contraction in January. Russia’s economy has suffered from the...