Four points on EM political risk premiums

The key determinants of EM political risk premiums are the type of political shock and the strength of an economy’s external balance sheet. With this in mind, Ukraine and Argentina have the greatest potential to suffer large and long-lasting political risk premiums this year.
Continue reading

More from Emerging Markets

Emerging Markets Economics Chart Book

Inflation concerns build

Inflation has risen sharply across the emerging world in the last few months, prompting much more cautious words from central banks (mainly in Latin America and Emerging Europe), but we expect that EM price pressures will ease in the coming months. The recent spike in energy inflation should unwind soon, while supply constraints that are pushing up inflation for some goods won’t last indefinitely. With demand some way below most EMs’ supply potential, underlying inflation rates should fall back. We’re more concerned about inflation dynamics in Central Europe though, and central banks in Czechia and Hungary could shortly join Russia and Brazil in being among the first to hike rates.

18 June 2021

Emerging Markets Economics Update

China is about to flood EMs with vaccines

By September, China could be in a position to export 340mn vaccines doses each month – more than most regions of the world have administered in total so far. China’s vaccines are less effective than others, but have been found to suppress outbreaks where they have been used if a high enough share of a population is vaccinated. Large-scale exports from China could therefore give a significant boost to the prospects of many EMs now struggling to vaccinate because of a lack of vaccine supply.

17 June 2021

Emerging Markets Economics Update

EM policy tightening will proceed only gradually

The broad-based rise in inflation across EMs this year has elicited varying degrees of policy responses from central banks. Those facing above-target inflation and most worried about credibility (Brazil, Russia) have already started hiking rates and will continue to do so. Other EMs where recoveries are progressing well could follow suit soon (Czech Republic, Hungary and Chile). But for many, protracted and bumpier recoveries mean that central banks will delay policy normalisation for a while longer.

16 June 2021

More from Capital Economics Economist

Emerging Markets Economics Update

EM easing cycles not all to do with the Fed

Financial markets have come round rapidly in the last few weeks to our view that EM monetary policy will be loosened further this year. But EM loosening cycles have much more to do with weak domestic growth and low inflation than the prospect of interest rate cuts in the US.

20 June 2019

European Economics Focus

Cyprus to outperform euro-zone, but risks remain

Cyprus has now recovered from the economic crisis of 2012-13, which was caused primarily by its oversized banking sector. While a number of risks remain, notably the high level of non-performing loans, we expect the economy to continue expanding more rapidly than the euro-zone as a whole for the next few years, and the public debt ratio to fall steadily.

20 June 2019

Emerging Europe Data Response

Russia Activity Data (May)

May’s activity data suggest that, following extremely weak GDP growth in Q1, Russia’s economy has failed to gather much momentum in Q2.

20 June 2019
↑ Back to top