IN 1994 this newspaper launched a new emerging-market indicators page to mark “a fundamental and remarkably rapid change in the balance of the world economy”. Emerging economies were then growing twice as fast as the rich ones, and their stockmarkets were surging. But the timing of the launch was awful. It came at the start of a dismal decade for emerging economies, with crises in Mexico at the end of 1994, Asia in 1997, Russia in 1998, Brazil in 1999, Turkey in 2000, Argentina in 2001 and Venezuela in 2002. By 2002 the MSCI emerging-market share-price index had lost almost 60% of its 1994 value. Last year it regained that peak. But is the current economic boom any more sustainable?

The 25% drop in emerging stockmarkets during May and June of this year was a warning. Having tripled over the previous three years, share prices, fuelled by excessive global liquidity, had got ahead of themselves and a correction was overdue. However, the economies themselves look in better shape than for decades. Over the past five years GDP per head in the emerging economies has grown by an annual average of 5.6%, compared with only 1.9% in the developed world. In the preceding 20 years GDP per head in poor countries had been growing by an average of 2.5%, little more than in rich economies.


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