FINANCE - MARKETS

Outlook

China may breathe less fire in 2024, the year of the dragon



Delano spoke with Didier Borowski, head of macro policy research at the Amundi Investment Institute, to discuss the firm’s economic outlook on some emerging markets during an interview in Luxembourg on 8 November 2023. Photo: Romain Gamba/Maison Moderne

Delano spoke with Didier Borowski, head of macro policy research at the Amundi Investment Institute, to discuss the firm’s economic outlook on some emerging markets during an interview in Luxembourg on 8 November 2023. Photo: Romain Gamba/Maison Moderne

In the second part of a two-instalment series, Didier Borowski from the Amundi Investment Institute explains that investing in emerging markets should be a country-by-country affair. It requires knowledge about the growth potential for each country, which are determined by their demographic profiles and the need for infrastructure, among other factors.

“China will not be the engine of growth as observed in the last two decades,” said Didier Borowski, head of macro policy research at the Amundi Investment Institute during an interview on 8 November 2023. He thinks that the recently announced fiscal stimulus (0.8% of GDP) will likely support a growth level of around 5% in Q4 and in the first half of 2024.

The great story in Indonesia is its demographic profile contrary to China
Didier Borowski

Didier Borowskihead of macro policy researchAmundi Investment Institute

The real estate crisis is not over, and it will persist over 2024, impeding growth, which is in the process of transitioning towards 3%, according to Borowski. On the other hand, he opined that the economy will likely be better balanced, thanks to a greater reliance on domestic consumption. However, governance is a topic that remains in limbo in China.

Emerging markets: a heterogenous group

Borowski does not see the emerging market as a uniform mass or even regional blocks. “Being positioned on [the] EM market does not mean anything… one has to be granular and look at them on a country-by-country basis…whether it is for debt or equities.” For instance, India and Indonesia have sustainable growth profiles, contrary to China.

“India suffers from an infrastructure deficit but with a significant growth potential in the coming decade,” said Borowski. The same was already being said about India 20 years ago, as its governance--based on the rule of law--was seen as helping it to surpass China. Yet Borowski thinks that developments are now accelerating.

“The great story in Indonesia is its demographic profile contrary to China,” commented Borowski. The growth potential in Indonesia and India are increasing, as opposed to China, where it is slowing down.

Moreover, he observed a decorrelation of the economic cycle among countries in EM, justifying the case for geographical diversification in a portfolio.