EM GDP and Economic Size was Overstated via Deutsche Bank

Via DB,

(1) The recent slowing in China and EM more broadly has raised concerns about the level and sustainability of global growth;

(2) But EM growth has been slowing for the last 5 years, while DM growth picked up and global growth over the last few years has been perfectly steady at near trend rates, measured using conventional PPP exchange rate weights;

(3) Conventional PPP exchange rate based measures massively overstate the size of EM in the global economy: by $35 trillion or 2 US GDPs;

(4) Global growth has been rising over the last few years when measured using market exchange rate based weights;

(5) The arithmetic of global growth: DM (60%) is still bigger than EM (40%) and 1pp of additional DM growth offsets 1.5pp of slower EM growth;

(6) We expect a continued normalization of EM growth lower though we are almost there; DM growth to pick up; and global growth (i) at conventional PPP weights to be near trend rates while (ii) at market rate weights to accelerate above trend rates in 2016