Mounting headwinds set the stage for slower growth

The EM recovery is now entering a more difficult phase as the boost from economic re-opening fades, supply shortages bite, growth in China weakens and the terms of trade worsen for major commodity producers. Lower vaccine coverage means that the threat of renewed virus waves and lockdowns will continue to cast a cloud over the outlook for some regions. As a result, GDP in emerging markets will stay some way below its pre-virus GDP path. Elevated rates of inflation will keep central banks in Latin America and Emerging Europe in tightening mode, while those in Asia will generally keep rates low.