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Current account risks building in Em. Europe & Lat Am

The shift to current account surpluses in Indonesia and South Africa suggest that these economies may be better placed to weather any fallout from rising US interest rates than in the past. But current account deficits have become an increasing cause for concern in parts of Emerging Europe (Hungary, Poland and Romania) and Latin America (Colombia and Chile). Drop-In: Join Chief Emerging Markets Economist William Jackson and Jason Tuvey, head of our Turkey coverage, shortly after this Thursday’s CBRT meeting for a discussion about Jason’s new report on economic policy-making in Turkey, the impact of the lira’s collapse and brewing macro risks this Thursday 20th January at 09:00 ET/14:00 GMT. Register here.
William Jackson Chief Emerging Markets Economist
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Emerging Markets Economics Chart Book

Asia joins the EM rate hike club

Upside surprises to inflation coupled with a hawkish Fed have prompted aggressive monetary policy responses by central banks across the emerging world over the past month. Policymakers in Czechia, Romania, Chile and Egypt raised interest rates by more than expected while Mexico’s central bank appears to be shifting its tightening cycle into a higher gear. Meanwhile, a handful of Asian central banks kicked off their tightening cycles, with India, Malaysia and the Philippines raising interest rates. Looking ahead, we think tightening cycles in Emerging Europe and Latin America have a bit further to run, while policy normalisation in Asia is likely to be gradual. The key exception is China where policy is likely to be loosened a bit further, although a renewed round of large-scale stimulus seems off the cards. LatAm Drop-In (26th May, 10:00 ET/15:00 BST): Join our 20-minute briefing about Colombia’s election and other regional political and fiscal risks – including Lula vs Bolsonaro in October. Register here.

23 May 2022

Emerging Markets Economics Update

Emerging Markets Capital Flows Monitor

Net capital outflows from EMs appear to have picked up over the past few weeks amid the general risk-off mood in global financial markets. This is a worrying development for countries with fragile external positions, notably Turkey and some smaller frontier economies. But most major EMs are much better placed to cope with a period of capital outflows.

18 May 2022

Emerging Markets Economics Update

Inflation surge not just a food and energy story

Higher food and energy prices go some way to explaining the rise in headline inflation rates across the emerging world, but this is only part of the story. Core inflation has also jumped in many EMs, especially in Emerging Europe and Latin America. This will keep central banks in both regions in tightening mode. With inflation in Asia and South Africa more subdued, tightening cycles there will be more gradual. EM Drop-In (17th May): Do current EM debt strains point to a repeat of the kinds of crises seen in the 1980s and 1990s? Join our special briefing on EM sovereign debt risk on Tuesday. Register now.

16 May 2022

More from William Jackson

Emerging Europe Economics Update

The implications of the Russia-Ukraine crisis

The deadlocked end to talks between Russia, the US and NATO and subsequent hawkish noises from Russian officials have caused a risk premium to emerge on Russian asset prices and will keep the prospect of tighter Western sanctions on the table. The downside risks for the ruble and Russian assets are building, as are the upside risks for European natural gas prices. In view of the wider interest, we are also sending this Emerging Europe Economics Update to clients of our Commodities Overview, Energy, FX Markets and Global Markets services.

14 January 2022

Emerging Markets Economics Chart Book

Omicron sweeps across the emerging world

The Omicron variant of COVID-19 is causing new virus cases to surge in the emerging world. Many EMs are reporting record daily cases or that new infections are rising sharply. South Africa’s experience offers some hope – cases are now falling sharply there and it looks like the economic fallout was limited. Elsewhere, most EM governments are following South Africa’s playbook by imposing limited (if any) containment measures, although China is a key exception. And given weakness in testing capacity and large informal sectors in most EMs, workplace absenteeism is unlikely to be as economically disruptive as in DMs.

14 January 2022

Latin America Data Response

Brazil IPCA (Dec.)

The fall in Brazilian inflation to a four-month low of 10.1% y/y in December confirmed that the recent food and energy inflation spikes are starting to unwind. But with the headline rate still far above target – and inflation in some core goods and services categories continuing to rise – Copom will deliver another large rate hike (of 150bp, to 10.75%) when it meets next month.

11 January 2022
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