Could the crisis lead to higher EM inflation?

Large output gaps look set to keep inflation low in most emerging markets over the next few years. But further out, we think that worrying public debt trajectories in some places (Brazil and South Africa), and greater emphasis on growth over inflation by central banks in others, could result in monetary policy being kept too loose for too long, creating medium-term inflation risks.
Edward Glossop Emerging Markets Economist
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Emerging Markets Financial Risk Monitor

Turkey and frontiers in the firing line

The dramatic slump in the Turkish lira over the past month once again leaves the currency firmly in crisis territory. One crumb of comfort is that Turkish banks are in a better position to cope with large falls in the lira than they were during the 2018 crisis. Elsewhere in the emerging world, sovereign vulnerabilities look particularly acute in a handful of frontier markets, while longer-term banking sector risks loom in the UAE, India and Russia.

7 December 2021

Emerging Markets Economics Update

Disruptions no longer worsening, but Omicron a threat

November’s PMIs offered tentative signs that the worst of the supply disruption may have passed, but the bigger picture is that manufacturers in the emerging world remain stretched. And while it’s still too early to tell, the Omicron variant could exacerbate existing strains. The upshot is that supply constraints are likely to continue to weigh on industry for some time yet.

1 December 2021

Emerging Markets Trade Monitor

The impact of Omicron on EM trade

If the new Omicron variant leads to tighter containment measures across the world, that would probably prop up demand for pandemic-related goods to the benefit of Asian exporters. Meanwhile, oil producers are likely to see external positions deteriorate if the plunge in prices is sustained. But arguably the most clear point for now is that the new variant will lead to renewed slumps in tourism, adding to balance of payments risks in the likes of Tunisia and Sri Lanka.

30 November 2021

More from Edward Glossop

Frontier Markets Monthly Wrap

SDR allocation no panacea for distressed frontiers

A fresh allocation of IMF Special Drawing Rights (SDRs), if implemented, would provide a welcome boost to the depleted foreign exchange reserves of some distressed frontier economies. But an allocation wouldn’t address underlying dire debt dynamics, notably in Ecuador, Sri Lanka, Ethiopia and Zambia.

3 March 2021

Emerging Markets Economics Update

Manufacturing PMIs still point to further EM recovery

February’s manufacturing PMIs released across the emerging world were the proverbial mixed bag but, taken together, generally point towards solid EM industrial production growth in the next month or two. There are signs under the hood of supply disruptions and rising price pressures in some places, which may be explained partly by semiconductor shortages.

1 March 2021

Emerging Markets Trade Monitor

Microchip shortages: first thoughts on the trade impact

A global shortage of semiconductors is disrupting auto production, and – among EMs – it could hit exports from Central Europe and Mexico in particular. But some of the lost revenue should be made up once shortages ease. Meanwhile, strong semiconductor demand is positive for the major producers in Asia, although their overall export revenues are still likely to soften later this year as global consumption patterns normalise.

26 February 2021
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