Bank of America Merrill Lynch said Tuesday it expects solid growth in global emerging market economies in 2011 but said it will not match the current year as imports will tend to grow faster than exports.
The firm forecast emerging markets will have economic growth of 6.4 percent in 2011, down from 7.4 percent expected for the current year. Emerging markets will make up 80 percent of global economic growth next year.
Growth will be led by robust domestic demand, yet "net exports become (a) drag on growth in 2011," said Alberto Ades, co-head of global emerging markets fixed income strategy and economics.
Inflation is expected to rise to 5.5 percent for the sector next year then moderate to 4.9 percent in 2012.
Central banks will react to inflationary pressures, Ades said, by raising interest rates and accumulating foreign exchange reserves.
"We see inflationary pressures developing next year on the back of strong growth and higher commodity prices," Ades said.
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