EM financial conditions still loose barring LatAm

Our financial conditions indices show that conditions remain loose by historic standards in most EMs. The key exception is Latin America, where conditions have tightened sharply this year due to rising interest rates and fiscal risks. This could pose a headwind to economic recoveries in the region.
Kimberley Sperrfechter Assistant 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 Kimberley Sperrfechter

Emerging Markets Financial Risk Monitor

Evergrande & frontier sovereign debt risks build

The combination of large foreign-currency debt burdens, low FX reserves and weakening currencies means that the risk of sovereign defaults in Sri Lanka and Tunisia is growing. Elsewhere, China’s largest property developer, Evergrande, appears to be close to collapse, which would cause large losses for banks and bondholders. Were this to cause stress in the banking sector, the government would ultimately step in to restore stability. Elsewhere, banking sectors in Turkey, India and the UAE are points of concern.

9 September 2021

Emerging Markets Economics Update

EM current account balances: where do the risks lie?

With external positions in decent shape in most major EMs, the macroeconomic fallout from any tightening of external financing conditions should be limited. But there are a handful of EMs which look vulnerable. Turkey remains the key one, but risks are also emerging in a few other countries, including Romania and the Andes.

2 September 2021

Emerging Markets Economics Update

EM manufacturing recovery comes off the boil

The EM manufacturing PMIs for August suggest that virus disruptions and supply chain constraints held back output in much of Emerging Asia. Manufacturing slowed in most other EMs too, although there were at least early signs in Emerging Europe that shortages and price pressures are starting to ease.

1 September 2021
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