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A record number of sovereign dollar bonds are now trading at distressed levels, although these are mostly those of smaller EM governments. Among the most highly distressed sovereigns, Zambia and Ecuador are most likely to default in the very near term. …
24th March 2020
The proliferation of measures to curb the spread of the coronavirus as well as shifts in consumer behaviour will have a severe effect on retail, accommodation, recreation and transport sectors across the emerging world. Mexico and parts of East Asia are …
19th March 2020
Governments in the developed world are unveiling major fiscal and monetary policy responses to try to stave off a financial crisis, and some EMs (notably parts of Emerging Europe and Emerging Asia) have the scope to ramp up their efforts too. That said, …
Extremely dense populations in urban areas, poor healthcare provision, and limited ability to impose quarantine measures mean that countries in South and South-East Asia, as well as Egypt and Nigeria, look highly exposed to a large-scale coronavirus …
18th March 2020
The broad-based tightening in EM financial conditions in recent days has been similar in scale to the onset of the global financial crisis. Conditions are now particularly restrictive outside of the BRIC economies, and is another reason to expect that …
16th March 2020
The recent oil price shock has invoked comparisons with 2014-16, when prices fell to similarly low levels and large EMs – notably Brazil and Russia – entered crises. But this time around, we think that crisis risks are limited to the smaller EMs, and …
11th March 2020
If the recent tightening of external financing conditions is sustained, it would result in severe balance of payments strains for the usual suspects (Turkey and Argentina), but also some of the smaller EM oil producers such as Angola, Bahrain and Oman. …
The sharp drop in oil prices won’t cause major economic strains in Saudi Arabia or Russia, suggesting that they will raise output and oil prices will remain low over the course of this year. But external positions in other oil producers (Angola, Colombia …
9th March 2020
The continued spread of the coronavirus and the Fed’s emergency rate cut will result in more aggressive loosening in EMs than we previously envisaged. We expect central banks in much of Emerging Asia to continue cutting interest rates, and have now …
4th March 2020
In light of the accelerating spread of the coronavirus – and the economic disruption that is likely to follow – we are pulling down our GDP growth forecasts for Q1 and Q2 of this year. Growth is likely to rebound over the second half of the year, but most …
2nd March 2020
The collapse in the EM manufacturing PMI to an 11-year low in February all but confirms that EM growth has fallen to its weakest rate since the global financial crisis. But the survey is yet to fully capture the disruption from coronavirus on EMs outside …
This Activity Monitor outlines five key points on the coronavirus fallout for EMs, including what we can say about the impact so far. At the very least, it looks like the virus will cause aggregate EM GDP growth over this year as a whole to slump to its …
28th February 2020
The economic fallout from the coronavirus outbreak is likely to be particularly severe for a number of frontier markets. Due to its deep integration into global supply chains, Vietnam’s economy will be disrupted more than most by China’s factory closures. …
27th February 2020
We estimate that the coronavirus-related sell-off in EM currencies will push up inflation over the next year by 0.6-0.7%-pts in Russia, Turkey and South Africa, reinforcing our view that easing cycles in these countries are close to an end. For most other …
25th February 2020
There are early signs that the economic disruption resulting from China’s measures to contain the coronavirus is hitting supply chains and trade in Emerging Asia. There is also some tentative evidence of a hit to the trade further afield. EM exports had …
21st February 2020
The coronavirus is severely impacting China’s economy and the incoming data suggest that this is spilling over to other economies, particularly in Emerging Asia. Tourist arrivals to Thailand are down by 50% y/y, while trade data for Korea collapsed in the …
20th February 2020
The outbreak of the coronavirus appear to have caused a pull back of net capital inflows to EM bond and equity markets on a similar scale to that seen during flare-ups in the US-China trade war last year. But the most recent figures suggest that inflows …
14th February 2020
The impact of the coronavirus means aggregate EM GDP is likely to have contracted in q/q terms for the first time since the global financial crisis in Q1. If the outbreak is contained quickly, most lost output should be recovered later in the year. But if …
12th February 2020
Even if the coronavirus outbreak in China is brought under control and the recent moves in equity and bond markets unwind, we think that most EM assets will not make significant gains this year. This reflects our long-held pessimistic view of China’s …
11th February 2020
The economic disruption from the coronavirus outbreak will lead to further rate cuts in much of Emerging Asia. And in those countries where currencies have fallen sharply, the moves have not been big enough to worry policymakers. As thing stand then, this …
The coronavirus outbreak could expose financial vulnerabilities in China and other EMs if factory and other workplace closures are extended. Within China, property developers are particularly vulnerable to a halt in spending, though the government would …
6th February 2020
The coronavirus outbreak will result in much weaker growth in China in Q1 and has hit tourism sectors elsewhere. If factory closures in China are prolonged, the epidemic could start to cause more severe economic damage to the rest of the emerging world, …
4th February 2020
The January batch of EM manufacturing PMIs generally held up well, but the surveys are yet to capture the economic damage from the coronavirus outbreak. Extended factory closures in China are likely to disrupt EM industry this quarter, particularly in …
3rd February 2020
Chinese international tourist spending has surged over the past decade, which is one reason to think that the economic spillovers will be greater for the coronavirus than they were for SARS. But outside of Asia (and Mauritius), Chinese tourist spending is …
Our Tracker suggests that aggregate EM GDP growth stabilised in Q4, but it will no doubt weaken sharply in Q1. The coronavirus has already dealt a significant blow to China’s economy, and other EMs (mostly in the rest of Asia) will be hit via the impact …
31st January 2020
Official talks between Argentina’s new government and the IMF over the future of its record-breaking bailout started this month but, with the government having already restructured some of its local law debts, the need for urgent external financing has …
29th January 2020
There is no longer any doubt that China’s newly-identified coronavirus will hit its GDP growth in Q1 . And other parts of Asia (notably Hong Kong and Thailand) will suffer a drop in Chinese tourism receipts (see Chart 1), which could shave 1.5-2.0%-pts …
27th January 2020
We expect that the broad-based EM easing cycle has further to run in the coming months but, as growth and inflation in many countries rise, it will be less widespread than in 2019. More importantly, we think that there will be some dovish surprises …
23rd January 2020
We estimate that net capital outflows from Emerging Markets fell to a six-month low in December, and they probably declined further at the start of this year. With global growth close to bottoming out and the Phase One US-China trade deal now agreed, …
Table of Key Forecasts Overview – After a bad 2019, aggregate emerging market growth is likely to strengthen this year, driven by improvements in large EMs including Brazil, Russia and India. But recoveries will generally be lacklustre. And growth in …
22nd January 2020
The latest data suggest that y/y EM export growth turned positive in December, having contracted for much of 2019. We think this will mark the start of a run of better EM export figures. Meanwhile, the Phase One US-China trade deal removes a downside risk …
17th January 2020
The deal signed yesterday between the US and China was broadly as expected and has not led us to change our economic forecasts. The apparent ceasefire in the battle over tariffs removes a downside risk to growth. But tariffs remain high and we suspect …
16th January 2020
This decade is likely to be marked by slower growth and softer inflation in emerging markets. One consequence is that interest rates will probably be lower than most currently anticipate. A broad-based monetary easing cycle has been underway in emerging …
13th January 2020
Our measure of aggregate EM inflation, which hit a four and a half year high last month, should fall over the course of this year as the disruption caused by African Swine Fever fades. But this is largely a China story. For most EMs, higher oil prices and …
9th January 2020
The PMIs for December suggest that EM manufacturers, barring those in Latin America, ended 2019 on a firmer footing. Nonetheless, the external backdrop will remain challenging in 2020. The EM manufacturing PMI held steady at 51.0 in December for the …
2nd January 2020
EM activity slowed at the start of Q4 and aggregate growth in 2019 as a whole is likely to be the weakest since 2015. Conditions should improve in 2020, but we think growth across many EMs will disappoint. All but a few of the smaller emerging economies …
20th December 2019
Argentine and Lebanese sovereign dollar bond spreads have narrowed over the past month (see Chart 1), but we think that they will widen again before long. The narrowing has been most dramatic in Argentina, where the new finance minister struck a …
19th December 2019
2020 will be a year in which EM GDP growth edges up and many major central banks catch investors by surprise. This Focus outlines our key calls for next year. 1. Policymakers in China will ease monetary policy significantly as the economy slows . Growth …
18th December 2019
Economic growth across the emerging world has slumped this year but, with the important exception of China, recoveries should take hold in 2020. Recent interest rate cuts will keep financial conditions accommodative. And governments will continue to …
17th December 2019
The contraction in EM export growth deepened in October and November but should ease in the next few months as the drags from lower commodity prices and a shift in the Asian electronics cycle fade. Meanwhile, although trade deals agreed by China and …
Optimism about an imminent resolution to the trade war between the US and China and subsiding protests in Latin America have supported EM currencies over the past month. But, barring a few exceptions, we think that they will weaken against the US dollar …
11th December 2019
On a net basis, capital continued to flow out of Emerging Markets (EMs) last month, and we think that 2020 will be the seventh consecutive year of outflows. Capital flows play a major role in EMs, as they finance spending and affect financial market …
Concerns about foreign currency debts in emerging markets have flared up again in recent weeks, but we think that the worst of these fears are probably overdone. FX debt burdens in most EMs have fallen as a share of GDP in recent years and balance sheet …
3rd December 2019
The November manufacturing PMIs point to diverging prospects for EM manufacturers at a regional level, with conditions improving in most of Emerging Asia but deteriorating in Emerging Europe. The EM manufacturing PMI stayed at 51.0 in November for the …
2nd December 2019
EM GDP growth picked up in Q3 and, despite a likely slowdown in China, we expect that aggregate EM growth will be a touch stronger in 2020 than it has been this year. Most major EMs have now released Q3 GDP data. By our estimates, EM GDP growth edged up …
29th November 2019
Ecuador this month joined the handful of frontier economies where sovereign dollar bonds are trading at levels commonly associated with default. (See Chart 1.) But with the IMF likely to stand by the government, we think that default fears are overdone …
28th November 2019
We estimate that net capital outflows from emerging markets (EMs) eased in October, and more timely data point to a further improvement so far this month. But we doubt that, on a net basis, capital will flow in to EMs anytime soon. Capital flows play a …
20th November 2019
The year-on-year rate of EM export growth should turn positive in the coming months, but this will mainly reflect favourable base effects from the Asian electronics cycle rather than stronger underlying demand. The latest EM export data have been weak . …
19th November 2019
Ongoing protests in Chile, Hong Kong and Lebanon will weigh on their economies and financial markets, but to different degrees. While the tightening of financial conditions and strikes in Chile will hit activity in Q4, the strength of the government’s …
15th November 2019
A new wave of structural reforms, if implemented, could plausibly lift average EM GDP growth by over 1%-pt in the 2020s. But we doubt that these reforms will be forthcoming. Even if they are, EM GDP growth would still be much weaker than the 6% average …
14th November 2019
