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Sovereign debt in the spotlight

Besides Argentina, EM sovereign debt risks are most acute in the smaller frontier markets. Investors have, rightly in our view, become more concerned about Lebanon’s public finances. And the experience of Argentina suggests that the country’s bond spreads will widen much further if default fears crystallise.
James Swanston Middle East and North Africa Economist
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Emerging Markets Economics Update

A closer look at the surge in EM food inflation

Aggregate EM food inflation has risen to its highest rate since 2008 and, while it should fall back in 2023, it’s likely to stay extremely high for at least the next four-to-six months. That will keep consumer spending under pressure and provide another reason for EM central banks to tighten monetary policy further. Asia Drop-In (30th June, 09:00 BST/16:00 SGT): Are Asia’s central banks behind the curve? Can the Bank of Japan and People’s Bank of China continue to go against the grain? Find out in our special session on what global monetary tightening looks like in Asia. Register now.  

28 June 2022

Emerging Markets Economics Update

EMs stepping up to support currencies

A handful of EM central banks have ramped up FX sales to provide support to weakening currencies over the past couple of months. And with inflation high and the US dollar likely to strengthen further, others could follow suit. FX intervention is unlikely to prevent further depreciation, but central banks with healthy FX reserve buffers may have some success in slowing the pace of currency falls. In view of the wider interest, we are also sending this Emerging Markets Overview Update to clients of our FX service.

24 June 2022

Emerging Markets Economics Chart Book

High inflation to keep central banks in tightening mode

Having surged in recent months, there are some tentative signs that EM inflation is nearing a peak. Our measure of aggregate EM inflation was steady at 7.0% y/y between April and May and some indicators of pipeline price pressures have eased. But even so, our aggregate measure is running at its highest rate since 2008 and, even when inflation does fall back, it’s likely to remain well above many EM central banks’ targets for some time. Against this backdrop, most EM central banks are likely to tighten monetary conditions further. Indeed, we generally expect more rate interest rate hikes than most analysts do over the next 12-18 months. Asia Drop-In (30th June, 09:00 BST/16:00 SGT): Are Asia’s central banks behind the curve? Can the Bank of Japan and People’s Bank of China continue to go against the grain? Find out in our special session on what global monetary tightening looks like in Asia. Register now.  

23 June 2022

More from James Swanston

Middle East Economics Update

Saudi: easing of restrictions paves way for H2 recovery

Saudi Arabia’s economy suffered a small downturn in Q1 and the recovery so far this quarter has been slow-going. But, with the vaccine roll out picking up pace and restrictions being relaxed, coupled with rising oil output, the recovery is likely to gather momentum over the second half of this year.

2 June 2021

Middle East Economics Weekly

Bahrain COVID-19 surge, Oman strikes, OPEC+ meeting

The recent surge in COVID-19 cases in Bahrain – which comes despite a rapid vaccine rollout – will delay its economic recovery and serves as a warning that other countries’ vaccination campaigns have much further to run. Elsewhere, protests in Oman over the past week prompted the government to row back on some of its austerity measures, which is likely to raise concerns about rising public debt and the dollar peg. Finally, next week’s OPEC+ meeting is likely to be a straightforward affair, but we will be keeping a close eye on any comments regarding how the cartel will potentially accommodate higher Iranian oil output.

27 May 2021

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Tourism set for uneven recovery

Strong vaccine rollouts in the Gulf and Morocco have allowed for an easing of travel-related restrictions but there is still a long way to go and recoveries in tourism sectors are likely to be slow-going. And in the rest of the region, struggling vaccination programmes will further delay the re-opening of tourism sectors.

26 May 2021
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