Growth in EMs through policy? Not so fast. In the wake of the IMF’s latest World Economic Outlook, the FT's Jonathan Wheatley asks the question of the era: “What, if anything, can EM policymakers do to speed up growth and make any recovery sustainable?” With the US Fed pulling back from rate hikes, eurozone countries reluctant to spend, and the IMF projecting only a marginal growth slowdown in developing countries (to 4.4% this year, from 4.5% in 2018), investors are looking to emerging market governments for action.

What kind of action? It depends on the country. China’s stimulus measures have received a positive response from investors and India’s central bank has moved to cut rates over the past few months. Other emerging markets don’t have this sort of freedom to loosen monetary policy though, as John Paul Smith, partner at Ecstrat, points out. “The idea that we can all go on a fiscal binge, or that interest rates are so low that we can all do whatever we like — it just breaks down when you look at the countries,” he told the FT. Mexico, Turkey and Russia are just a few examples where, for economic or political reasons, governments do not have the kind of flexibility enjoyed by the powerhouses of Beijing and Dehli.

It’s the politics, stupid: For Smith, a key area for policy reform in emerging markets continues to be the level of economic involvement by the state, particularly when it comes to off-budget financing through state banks and preferential treatment given to parastatal organizations. Randolph Wrighton, MD at Barrow, Hanley, Mewhinney & Strauss, agrees, arguing that it is perhaps in the interests of emerging market governments to focus on improving transparency rather than embark on economic stimulus programs. “I don’t think it’s in anybody’s interests for them to stretch themselves to help their economies,” he says. “What they can do it keep moving towards first-world policies, with transparency, accountability and rules-based system.”