EM credit growth: where do the risks lie?

With the (usual) exception of Turkey, the strong rates of credit growth seen in some EMs including Brazil and Korea are unlikely to be sustained as policymakers have already started (or will soon turn to) tightening policy. The bigger concern is the extreme weakness of credit growth in other EMs such as Mexico and the Philippines, which threatens to further hold back economic recoveries.
William Jackson Chief Emerging Markets Economist
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Emerging Markets Economics Update

Car woes to weigh on recoveries in Mexico & CEE

The supply constraints that have hit global vehicle output have probably reduced the level of GDP by a modest 0.1-0.2% in most EM auto producers, but some countries like Czechia, Hungary and Mexico have suffered much bigger blows. And the drag from vehicle production is likely to persist for some time yet.

15 October 2021

Emerging Markets Economics Update

Emerging Markets Capital Flows Monitor

Net capital inflows into EMs appear to have dropped over the past few weeks as investors have turned more risk averse. Looking ahead, a further rise in US Treasury yields could lead to larger outflows from EMs over the coming months. The good news is that vulnerabilities to outflows in most major EMs look limited, but Turkey is a key exception.

13 October 2021

Emerging Markets Economics Update

China’s long-term property decline: the fallout for EMs

Irrespective of how the current problems in China’s property sector are resolved, property construction there is entering a period of structural decline. Among other EMs, the main effects will be felt in metals producers in Latin America and Africa, adding to reasons to expect weak long-term growth in countries such as Brazil and South Africa. In view of the wider interest, we have made this Emerging Markets Update available to clients of our Long Run Service

7 October 2021

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Latin America Data Response

Brazil Industrial Production (May)

The 1.4% m/m rise in Brazilian industrial production in May only partially reversed the falls in output in the three preceding months. And while surveys point to a stronger reading in June, the sector was probably a drag on q/q GDP growth over Q2 as a whole.

2 July 2021

Latin America Chart Book

Economic ‘immunity’ improving

Latin America is once again the global epicentre of COVID-19 but, from an economic perspective, the region has built up significant immunity to the virus. Indeed, despite the surge in new virus cases at the start of Q2, the latest activity data show that the region’s economies held up well, especially those of Brazil and Colombia. It appears that businesses and consumers have adapted to various restrictions, which bodes well for economies during the latest wave of infections. Better still, outbreaks appear to be easing and lockdown measures are being lifted in Argentina, Chile and Peru, which should support their recoveries heading into Q3. Overall, we’re more optimistic than most about the near-term economic outlook for Latin America, even though the region’s prospects are still dimmer than elsewhere in the emerging world.

29 June 2021

Emerging Markets Economics Update

Which EM central banks might hike next?

The next EM central banks likely to raise interest rates are those whose economic recoveries are relatively advanced and can focus on inflation and/or financial risks. Chile and Korea fit into this group and we expect rate hikes from both in August. Above-target inflation and growing domestic (fiscal) risks mean there’s an outside chance that Colombia’s central bank will hike soon too. Were global risk appetite to deteriorate sharply, tightening might also come onto the cards in South Africa.

28 June 2021
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