(CNN) - During their heyday at the start of this century, emerging markets were often referred to as the "engines of global growth." I can almost hear them revving back up again, but let's not refer to what we are witnessing as a high speed recovery.
It's more like a recovery at a reasonable speed limit.
The latest World Bank global outlook suggests they will climb back above 5% - hitting 5.3% - which is up 0.5% over last year, but more than 2% below their pre-financial crisis run rate of 7.5%.
Once one digs through the numbers you will find that not all emerging markets are created equal. This rings true in the BRICS economies themselves. China, under the relatively new leadership of President Xi and Premier Li, will hum along at a projected 7.7% in 2014. India is recovering from a near decade long low to hit nearly 6%. In fact, we should give a collective cheer to Asia, with regional growth pegged at 7.2%.
But the other largely populated and resource-rich BRICS are sputtering quite badly. Brazil is growing at about a third of the rate it did back in 2010, with projections of 2.4%. Vladimir Putin's Russia, despite mega spending on the Sochi Winter Games and the World Cup that will follow, is struggling to maintain growth of just over 2% and South Africa remains steady but unimpressive at 2.7%.
This year will be a testing one for the developing world. At the top of the priority list will be the pace of tapering by the U.S. Federal Reserve. The World Bank expressed enough concern by devoting a whole chapter on the potential impact on capital flows exiting emerging markets.
Once the former Fed Chief Ben Bernanke gave a hint of taking action, equity markets tumbled badly, some losing 20% from peak to trough between May 22 and mid-September, when the central bank backtracked on its plans.
So a great deal will depend if the new Federal Reserve Chairwoman Janet Yellen feels compelled to accelerate the move to trim the sails of the central bank. Not all emerging markets will be treated the same by investors if she does so.
Last autumn Morgan Stanley released a piece of work which is still resonating in the global investment community, called the "Fragile Five."
In that study, the bank suggests that Brazil, India, Indonesia, South Africa and Turkey share the same, vulnerable economic DNA of high budget and current account deficits plus wobbly currencies. Central banks in those economies were forced to raise interest rates, despite sluggish growth, to defend their reserves. Not a great recipe for growth this year and the fall in those currencies has triggered higher inflation due to the rising cost of imports.
According to Ian Bremmer, president of the strategic consultancy Eurasia Group, elections in the emerging markets this year will provide one of the greatest risks in 2014. The "Fragile Five" plus Colombia will hold elections this year. With slower growth still on the menu, the middle class (which rose to that wealth bracket through a decade of rapid expansion) is restive and more active.
We saw that in Brazil, Russia and Turkey in 2013 and strategists suggest we could witness more of the same this year if growth does not beat expectations put forth by the World Bank.
Image may be NSFW.
Clik here to view.
Image may be NSFW.Clik here to view.
