More than at any time since 1998, the last year has seen the IMF and World Bank in the dock. In one sense the crisis has given them a new lease of life, a new relevance. As the crisis has unfolded, the IMF has been given greater funds to cope with an expected spike in demand. It has worked hard to shed the traditional stigma attached to IMF aid, and created new support packages – acknowledging that, with aid as with so much else, one size often does not fit all.
That is the case for the defence. The prosecution’s case hinges on the speed – or lack of it – in the IMF’s response to the crisis, and in allocating its expanded pool of resources. Criticism has also come from certain potential recipient countries – not least Turkey itself, where the IMF meeting is being held this year – that the terms of prospective loans, although they have been relaxed, are still sufficiently draconian to be off-putting.
Within the emerging markets themselves, which the IMF and World Bank were principally created to serve, the experiences of the last year have had varying impact. That the world is carved into “emerged” and “emerging” markets might have outlived its usefulness. Emerging markets were always at varying stages of development, but marked discrepancies in the performances of “emerging market” economies since the depths of the financial crisis in late 2008 suggest any hegemony among the group is fast disappearing.
A group that had aroused comparable enthusiasm among investors during The Great Bull Market, emerging markets provoked varying levels of scorn when the tide turned, displaying vastly differing levels of market maturity.
Top of the class has been Asia. Part of its allure is its proximity to China, but the strong bounce in the Asia-Pacific region after the global crash at the end of last year is more than just geographical good fortune. The region arguably benefited from the chastening experience of 1998, which provided a valuable lesson in financial management. The region has had a conservative streak ever since, standing it in good stead for the crisis that came 10 years later.
At the other end of the scale has been Eastern Europe, which has taken a greater pummelling than most other regions – although in fairness even this geographically justifiable categorisation is disparate in terms of economic maturity and performance. As Asia relied on China, Eastern Europe leaned on its developed neighbours: China provided the sturdier support.
Latin America, much like the Middle East, is in some ways buoyed by its richness in commodities, yet, partly for that very reason, also suffers greater political turbulence and perceived risk than its European or Asian peers. The region suffered as much as most during the crisis, but has started to make a comeback. As with everywhere, sweeping generalisations are of limited value: Brazil has enhanced its reputation as one of the BRIC mega-EMs, while neighbouring Argentina has had an especially torrid time.
And then there is Africa – the continent of frontier markets. Africa has been relatively sheltered from the crisis due to its very lack of development. But with investors still smarting from the pain of the last two years, few are brave enough to venture there, for now at least, regardless of how strong a case can be made for it.
