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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
EM equities have continued to rise over the past month, seemingly driven by optimism about an imminent US/China trade deal and some improvement in the economic data. But we are sceptical that the rally will last, and forecast that EM equities will tread …
13th November 2019
We expect most major EMs to loosen fiscal policy further next year. Weak public finances mean that a few major EMs, notably Brazil and South Africa, will need to tighten policy. But aside from Argentina, the risk of messy sovereign debt crises is …
7th November 2019
More EMs’ income levels have fallen relative to the US’s than have risen this year, the first time this has happened since the 1990s. This is likely to be a sign of things to come in the 2020s. There are lots of ways of defining catch-up growth, but our …
6th November 2019
The EM manufacturing PMI stabilised in October and the breakdown provides further evidence that the downturn in EM export growth may have bottomed out. That said, any recovery is likely to be slow going. Having risen to a six-month high in September, the …
4th November 2019
The spotlight has shifted back onto weak sovereign debt positions in Frontier Markets this month after the election of a left-wing president in Argentina and growing political instability in Lebanon. As we see it, debt write-downs are the only way out for …
31st October 2019
Our Trackers suggest that growth slowed across large parts of the emerging world in Q3. But aggregate EM growth is probably close to bottoming out and we expect that it will strengthen a little in 2020. We estimate that aggregate EM GDP growth eased to …
30th October 2019
Economic and financial vulnerabilities are generally low across much of the emerging world, but there are a handful of weak links. Argentina’s sovereign debt vulnerabilities remain high and, whichever direction the new president takes, we think that a …
29th October 2019
While protests have spread across several EMs, most notably Hong Kong, parts of Latin America and Lebanon, there is no mechanical link between unrest and economic growth and asset prices. As it happens, large protests in emerging markets are comparatively …
25th October 2019
Governments that have been elected during episodes of severe market stress and have managed to turn things around have done so by securing some form of bailout package and announcing a credible reform plan. But they have also usually benefitted from …
23rd October 2019
After small net inflows in Q2, we estimate that emerging markets (EMs) experienced net outflows in Q3. With the recent detente in the trade war unlikely to continue, further capital outflows are likely in the coming quarters. Capital flows play a major …
While the downside risks of a global trade war are often overstated, we think the bigger concern is that the world splits into competing regional blocs that do not cooperate on trade or investment. This could cause global supply chains to splinter and …
22nd October 2019
The continued decline in core inflation across many emerging markets supports our view that most central banks’ easing cycles have further to run. Our measure of EM core inflation fell to 2.8% y/y last month (see Chart 1), the weakest rate since our …
18th October 2019
The EM export recovery paused in August and September, although we think exports should still strengthen over the coming quarters. This isn’t because of developments in the trade war – the recent improvement in the mood music is unlikely to be a prelude …
17th October 2019
Globalisation has peaked, with any further major integration unlikely. In fact, a policy-driven period of de-globalisation is increasingly likely. Flows of trade and foreign direct investment have flattened off as a share of nominal GDP over the past …
15th October 2019
Table of Key Forecasts Overview – Several large emerging markets, including Brazil, Russia and India, should emerge from recent weak patches over the coming quarters. But at an aggregate level, that will be offset by slowdowns elsewhere, most notably in …
11th October 2019
We estimate that the current wave of globalisation is responsible for around a third of the pick-up in global per capita income growth since 1990. Almost all of that reflects an improvement in productivity growth in emerging economies. For advanced …
10th October 2019
History shows that waves of globalisation are driven by both technology and policy, but protectionist shifts alone tend to end them. In some cases, like in the 1970s, a moderate pushback by policymakers can cause globalisation to stall. But the experience …
8th October 2019
If faced with a steep downturn, most EM central banks would be able to cut interest rates substantially in order to cushion their economies. Interest rates in a handful of countries are close to the zero bound, but these are typically economies with …
4th October 2019
Aggregate emerging market growth is likely to stabilise at close to 4% y/y in the coming quarters, but within this several different economic cycles are playing out. The recent resilience in Central Europe and, importantly, China, is unlikely to last. But …
3rd October 2019
The rise in the EM manufacturing PMI to a six-month high in September adds to our view that EM growth is stabilising, even as advanced economies continue to lose momentum. The EM manufacturing PMI rose from 50.4 in August to 51.0 in September. While it …
1st October 2019
The weakest balance sheets in the emerging world are concentrated in the Frontier Markets and, as a result, balance of payments crises occur more regularly. This lies behind Venezuela’s crisis, but also a growing inflation problem in Zimbabwe and (to a …
30th September 2019
The recent stabilisation in EM GDP growth has come alongside further evidence that solid consumer spending is helping to offset weakness in industry. We expect this trend to continue in the coming months. Our Tracker suggests that EM GDP expanded by …
27th September 2019
Rising tensions in the Middle East present a significant upside risk to our oil price and inflation forecasts, and could force a handful of EM central banks to abandon easing cycles or even hike interest rates. But a majority of central banks would …
26th September 2019
EM capital outflows persisted last month and, with the US-China trade war unlikely to abate, we think that they will continue in the coming quarters. However, the scale of outflows should remain modest, which in turn should limit the macroeconomic …
25th September 2019
For all the talk of a global slowdown, the incoming data from the emerging world have been encouraging. Having bottomed out in Q2, GDP growth held steady at around 3.5% y/y at the start of Q3. EM manufacturing growth picked up, while exports stabilised. …
20th September 2019
EM exports stabilised in July and August but, with the latest round of US-China tariffs yet to feed through and global growth subdued, we expect EM export growth to remain weak in the coming quarters. While the dollar value of EM exports in the three …
18th September 2019
Capital controls can be an effective tool if policymakers are able to plug loopholes and address the underlying economic vulnerabilities that initially resulted in pressures on the financial account. But this looks unlikely in EMs such as Argentina and …
12th September 2019
We expect EM currencies to come under further pressure over the coming quarters, but the falls are unlikely to be on the same scale as the ones which ended previous easing cycles. As a result, most EM central banks are likely to cut interest rates further …
5th September 2019
The last few weeks have been kinder to EM financial markets than the start of August, when equities and currencies slumped as the US-China trade war ramped up again. Even so, neither has performed particularly well, and we think that the stage is set for …
The rise in the EM manufacturing PMI for August is further evidence that the slowdown in EM GDP growth has bottomed out. But the surveys remain consistent with sluggish growth, and we continue to expect most EM central banks to loosen policy over the …
3rd September 2019
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 …
30th August 2019
The raft of GDP figures published in the last few weeks suggest that, having slowed over most of the past year, aggregate EM growth ticked up in Q2. But activity is still soft and we expect that EM growth to remain weak over the next 12-18 months. Almost …
29th August 2019
Argentina political developments sparked sharp falls in EM currencies over the past month, but this wasn’t enough to deter policymakers from continuing their easing cycle. Central bankers in Turkey, India, Brazil, Russia, Mexico, Thailand, and the …
21st August 2019
After a relatively calm first half of 2019, EM capital outflows probably picked up significantly in August as US-China trade tensions escalated. And outflows are likely to remain larger over the second half of the year, putting EM currencies under …
The US-China trade war, which has now been running for over a year, has exerted an increasingly large drag on EM exports. But other factors including weak global demand have been bigger drivers of the slump in EM exports. With the global economy set to …
20th August 2019
Emerging economies whose currencies have fallen by 15% or more against the dollar in a single day – as the Argentine peso did yesterday – have fallen into recession in 85% of cases in the last 25 years. Sovereign debt defaults occurred after roughly half …
13th August 2019
The falls in EM currencies today suggest that the South African rand, Turkish lira and many of those in Latin America will remain in the firing line if, as we think likely, concerns about Argentina’s debt continue to build. So far at least, there’s little …
12th August 2019
The latest phase of the trade war is likely to have a relatively limited direct impact on EM exports. But with the US and Chinese policymakers upping the ante, the indirect effects via a hit to confidence, tighter financial conditions and weaker …
6th August 2019
The falls in EM currencies in this latest leg of the trade war have been large compared with previous episodes. If this turbulence continues, a few EM central banks (e.g. in Indonesia and Mexico) would probably postpone interest rate cuts and one or two …
5th August 2019
The manufacturing PMIs for July suggests that growth in EM industry remained soft at the start of Q3, with activity in Emerging Europe weakening sharply. The surveys also provide further evidence that price pressures are easing, supporting our view that …
1st August 2019
The recent rally in frontier sovereign dollar bonds is unlikely to be sustained (see Chart 1) and we expect spreads to widen in Argentina, Ukraine and parts of the Middle East. We have raised concerns before about weak balance sheets in Bahrain and Oman. …
30th July 2019
Having slowed sharply in Q1 and at the start of Q2, it looks like EM GDP growth strengthened a little in May and June. Even so, with China’s slowdown set to resume and the global economy more generally faring poorly, aggregate EM growth will remain very …
26th July 2019
Economic and financial vulnerabilities remain low across much of the emerging world. But banking sector vulnerabilities are high in Turkey and China. And we are now explicitly forecasting a sovereign debt default in Argentina. Sovereign debt risks are …
24th July 2019
Early signs suggest that aggregate EM growth strengthened in Q2. (See Chart 1.) Our GDP trackers point to a recoveries across most of the emerging world. The rebound seems to have strongest in Emerging Europe where Turkey’s recession probably eased in …
19th July 2019
The US-China trade war truce, coming alongside Mercosur countries and Vietnam securing trade deals with the EU, has eased some of the worst fears about protectionism. But it’s far from certain that these trade deals will clear legislative hurdles. And …
18th July 2019
Net capital outflows from emerging markets look to have persisted last month, suggesting that the US-China trade war continued to weigh on investor sentiment. The truce announced at the late-June G20 meeting should have eased investors’ worries, but we …
17th July 2019
Emerging market (EM) equities have continued to recover from their sharp falls in May, but we do not think that they are out of the woods this year. Expectations for EM corporate earnings seem to be based on assumptions about the outlook for the global …
Table of Key Forecasts Overview – EM GDP growth has slowed sharply and, while it should bottom out soon, growth will remain very weak. Indeed, our forecasts lie below the consensus across much of the emerging world. China – China’s economy has stabilised …
8th July 2019
EM investment growth probably slowed to its weakest rate in twenty years in early 2019, although most of that seems to be related to tighter financial conditions and low commodity prices rather than the trade war. While there are signs that investment is …
5th July 2019
