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The EM manufacturing PMI recovered in June, led by China, which regained some momentum, and India, which continued to outperform. That said, the surveys remained at subdued levels in most EMs. And the second half of the year will prove difficult for EM …
1st July 2025
Capital inflows into EMs held up well in June despite the escalation of conflict in the Middle East. Were higher US tariffs to come into force after President Trump’s 90-day reciprocal tariff reprieve ends, that could spur a bigger move in outflows. But …
30th June 2025
This Update answers five key questions about a potential “closure” of the Strait of Hormuz and the potential impacts on global energy markets from any attempt to close the waterway. As it stands, it is arguably not in Iran’s best interests to close the …
23rd June 2025
This Update outlines potential outcomes of the Iran-Israel conflict and teases out the implications for the region, the global economy and commodity and financial markets. One point that emerges is that an escalation of the conflict still leaves multiple …
18th June 2025
The overnight strikes by Israel on Iran mark a major escalation in the conflict in the region and, with the oil market tighter than it was a few months ago, the risks to oil prices look more balanced than we’d previously thought (rather than skewed to the …
13th June 2025
EM sovereign debt risks remain much higher than in the pre-pandemic period. There are positive stories of declining risk in those EMs undergoing reforms (e.g. Argentina) and low fiscal risks in the majority of EMs, but sovereign debt dynamics appear …
12th June 2025
Recent presidential elections in Poland, Romania and Korea have led to significant moves in their financial markets. But from a macro perspective, what also matters is the composition of the legislature and the challenges the economy faces. Those …
10th June 2025
The manufacturing PMIs remained subdued across EMs last month despite the US-China trade truce. That said, the timely hard activity data released so far has shown more resilience than the survey data. The aggregate EM manufacturing PMI fell from 50.5 in …
3rd June 2025
Emerging Markets Capital Flows Monitor (May 2025) …
29th May 2025
In this Update, we answer several key questions about how the US Court of International Trade (CIT) tariff ruling might affect the US and other economies. The outlook may now rest on the decision of the Republican-stacked Supreme Court. The upside risks …
The proposed 5% US tax on remittance outflows would have a particularly large negative impact on Central American economies such as Honduras, Guatemala and El Salvador. Remittance flows could plausibly drop by around 1% of GDP in these countries. And …
21st May 2025
The flurry of diplomatic activity by both the US and China this week underscores that geopolitical alliances in parts of the emerging world are fluid. We suspect that most countries in Latin America and the Middle East will try to straddle the China-US …
16th May 2025
The recent climbdown has left the effective US tariff rate on the rest of the world at around 15% as opposed to the 27% which was threatened at the height of this year’s trade war. While this is still the highest since the 1930s, it is unlikely to cause a …
13th May 2025
Global Trade Stress Monitor …
The US and China have each suspended for 90 days all but 10% of their Liberation Day tariffs and cancelled other retaliatory tariffs. This is a substantial de-escalation. However, the US still has much higher tariffs on China than on other countries and …
12th May 2025
The trade data available for March and April suggest that a large number of EMs have benefitted from a front-running of tariffs in recent months, particularly those across Asia (Taiwan, Vietnam and India). That said, business surveys have weakened, …
8th May 2025
The manufacturing PMIs show that US trade policy weighed on sentiment across the emerging world, although the falls in the surveys arguably weren’t as bad as might have been feared. In India’s case, there may also be some tentative signs of a pickup in …
2nd May 2025
This is a revamped version of our quarterly Financial Risk Monitor to include commentary and analysis of our latest EM risk indicators. Currency vulnerabilities remain near multi-year lows, large deficits leave the public finances in poor shape Higher US …
30th April 2025
Emerging Markets Capital Flows Monitor (Apr. 2025) …
24th April 2025
The Spring Meetings of the World Bank and IMF take place next week under the cloud not just of US trade protectionism but also the Trump administration’s seeming hostility towards multilateral institutions – and the threat of US withdrawal. An end to (or …
17th April 2025
The extremely high US import tariffs imposed on China will likely strengthen the forces that have driven multinational corporates to shift production for the US market away from China and towards other EMs in recent years. Those EMs with spare capacity in …
16th April 2025
President Trump’s trade war has created material downside risks for the global economy. Our forecasts assume that tariffs on most countries outside China will stay at 10% and retaliation by other governments will be moderate. In this scenario, global GDP …
10th April 2025
Some oil producers, such as the UAE and Kuwait, should be able to easily weather a period of low oil prices. But a sustained decline in prices would be a bigger challenge for Saudi Arabia, which would need to tighten fiscal policy, and producers with weak …
9th April 2025
President Trump’s reciprocal tariffs are particularly high on some of the lowest-income EMs, which are also among the most vulnerable to the suspension of US aid flows. That raises the risk of balance of payments strains, and also provides an opening for …
8th April 2025
We hosted two online Drop-In sessions on 3 rd April to discuss the fallout from President Trump’s Liberation Day tariff announcement. (See a recording here .) This Update contains answers to some of the questions that we received and links to several more …
3rd April 2025
The EM manufacturing PMI ticked up in March on the back of a pick-up in China as well as a continued recovery in Central and Eastern Europe. But tariffs present a major headwind to EMs’ industrial sectors, and the surveys already suggest that Mexico’s is …
1st April 2025
Underlying inflation problems in Central and Eastern Europe and Latin America and perennial exchange rate worries in Indonesia mean that their central banks are, if anything, likely to react hawkishly to the effects of US import tariffs. Interest rates …
The US would have to exert a lot of pressure to coerce most major countries into putting large tariffs on goods from China . Curtailing trade with China would have an economic cost and even countries that have closer economic ties with the US would still …
31st March 2025
Emerging Markets Capital Flows Monitor (Mar. 2025) …
27th March 2025
In this Update, we answer several key questions about how the announced 25% tariffs on US imports of autos and parts might affect the global economy and the US itself. Mexico, Slovakia and Korea are most exposed with up to 1.6% of GDP at risk. But the …
The protests that have swept several EMs in recent weeks are likely to have a longer-lasting economic impact in countries with weak balance sheets and/or where they lead to a major shift in policy. It’s too early to conclude that any of the affected EMs …
25th March 2025
Because the concept of ‘reciprocal tariffs’ is merely a cover for the White House to impose whatever tariffs it likes, they pose a potentially considerable threat to world trade. This Update provides answers to ten questions regarding what we know, as …
The financial market sell-offs in Indonesia, Turkey and Colombia this week are, in part, a reflection of concerns about strained balance sheets. We think that vulnerabilities in some frontier markets and slow-burning fiscal problems in a handful of larger …
20th March 2025
The policy turnarounds that have continued in Argentina, Egypt, Nigeria and Turkey have led to a sharp reduction in sovereign risk premia but have had mixed success in restoring macroeconomic stability so far. We remain most optimistic on the outlook for …
12th March 2025
The events of the past two weeks have called into question whether the US is severing ties not just with adversaries such as China but also allies, including Canada, Mexico and the European Union. This would radically alter the shape of the fractured …
4th March 2025
The small uptick in the EM manufacturing PMI in February appears in part to be a result of the front-running of US tariffs, and is unlikely to be sustained. For now, the surveys continue to point to weak goods price inflation across the emerging world. …
3rd March 2025
President Trump’s attempts to reset relations with Russia have led some to suggest that he may be attempting to break apart the Sino-Russian alliance as Nixon did in the early 1970s (although in Nixon’s case, by reaching out to China). But while this may …
27th February 2025
Emerging Markets Capital Flows Monitor (Feb. 2025) …
26th February 2025
A week spent visiting clients, policymakers and contacts in India underlines that the digital economy is thriving, that there is hope that India will not be hit hard by Trump’s tariffs, and that much-needed improvements in macroeconomic data reporting …
25th February 2025
We doubt that Donald Trump’s reciprocal tariff threat, nor his broader protectionist agenda, are priced in markets fully. We expect US Treasury yields and the dollar to edge up as these tariffs come into effect. In our view, this, alongside continued …
18th February 2025
The outcomes of central bank meetings over the last few weeks underscore the point that Asia will lead the next phase of the EM monetary easing cycle this year, alongside Mexico. Meanwhile, there are a handful of EM central banks (particularly in Central …
17th February 2025
If the Trump administration pursues a reciprocal tariff strategy rather than a 10% universal tariff, then it could result in a smaller rise in the overall effective tariff rate than we have assumed. But while most DMs would come out relatively unscathed, …
13th February 2025
The latest PMIs suggests that the weakness in EM manufacturing at the end of last year has continued into 2025. While the events of today have highlighted the uncertainty around Trump’s trade policy, tariffs will prove another headwind to EM manufacturing …
3rd February 2025
The Trump administration’s pausing of US aid is a big headwind for many conflict-ridden economies (including Syria and Ukraine) as well as parts of Sub-Saharan Africa, but is unlikely to move the macro needle for most EMs. The potentially bigger …
30th January 2025
This is a revamped version of our quarterly Financial Risk Monitor to include commentary and analysis of our latest EM risk indicators. Currency risks remain low, but fiscal vulnerabilities continue to lurk Financial vulnerabilities remained near …
29th January 2025
India’s outbound tourism market is poised to become one of the world’s largest over the coming years. The Maldives and the UAE are arguably the biggest beneficiaries, though Oman and Thailand are well placed to take advantage too. Other EMs – particularly …
27th January 2025
We are pessimistic about the outlook for most emerging market assets in 2025, due to the effects of Donald Trump’s agenda, slowing Chinese activity, subdued commodity prices, and domestic challenges. Trump’s first day in office proved a decent one for …
22nd January 2025
Capital outflows from EMs have picked up again over the past few weeks amid a strengthening of the US dollar and broad increases in bond yields, but also country-specific issues – most notable declining optimism about the outlook for India’s economy and …
20th January 2025
EM sovereign FX debt issuance surged over the past year and at the start of 2025, albeit with many sovereigns returning to global markets and issuing at high interest rates. Borrowing does not look excessive and there’s unlikely to be a further sharp rise …
14th January 2025
The Cold War was defined by geopolitical blocs – the Soviet or Eastern bloc against the Western bloc. Geopolitics retreated with the collapse of the Soviet Union. The period from the early-1990s to the early-2010s was instead an era of globalisation: most …
7th January 2025
