The SVB collapse & contagion risks in EMs

At the time of writing, financial markets appear to be stabilising after the turmoil caused by the collapse of SVB. And it doesn’t look like EMs have suffered large capital outflows or strains in their banking sectors. If this relatively benign scenario persists, EM central banks might begin to ease monetary policy sooner than we currently have in our profile. But otherwise the macro implications will be limited. In a more malign scenario, however, the growth outlook for EMs would be altogether much worse. While most central banks would cut interest rates aggressively, those of countries with large current account deficits (e.g. Colombia, Romania, Hungary) could be forced to hike interest rates to shore up their currencies.