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EM GDP growth slowed in Q1 to rates only seen a handful times in the last two decades. And while there are signs of a turnaround in some of the worst-performing economies, growth in the emerging world as a whole is likely to remain subdued over the next …
28th June 2019
Frontier financial markets have made gains over the past month, but have generally underperformed their emerging market counterparts. The performance of equity markets has been mixed. And currencies in most cases have only edged up against the dollar. …
27th June 2019
EM GDP growth slowed to just 3.3% y/y in Q1, its weakest pace since the first half of 2016, and our Tracker suggests that it remained sluggish in Q2. Growth should pick up a little in the second half of the year. Large commodity producers, such as Brazil, …
21st June 2019
Financial markets have come round rapidly in the last few weeks to our view that EM monetary policy will be loosened further this year. But EM loosening cycles have much more to do with weak domestic growth and low inflation than the prospect of interest …
20th June 2019
The upcoming meeting between Presidents Trump and Xi at the G20 summit has raised hopes of a US-China trade deal but, as things stand, we think it is more likely that the trade war will ultimately escalate further. And either way, EM exports are likely to …
19th June 2019
Hopes that much looser monetary policy, particularly in the US, will prevent more weakness in the global economy have supported emerging market (EM) assets recently, but we doubt that this will last. … Monetary easing unlikely to drive a sustained …
With EMs such as Argentina, Ukraine and Ecuador having recently agreed IMF deals, and others (Turkey) still looking vulnerable to a crisis, this Update looks at what happens to countries after bailouts. In the first year, sovereign bonds tend to rally and …
18th June 2019
African Swine Fever has already pushed inflation in China up markedly and, if the disease spreads further, it could also add around 0.3%-pts to inflation in parts of Asia and Eastern Europe. The impact on trade flows is likely to be limited. But it does …
13th June 2019
The recent escalation of the US-China trade war appears to have resulted in net capital outflows from EMs in May – the first time that has happened since January. With the trade war likely to intensify and global risk appetite set to deteriorate, further …
There is growing attention on sovereign debt risks in some EMs. Vulnerabilities seem to be most acute in Argentina as well as in some of the smaller economies in the Middle East and Africa such as Lebanon, Zambia, Bahrain and Oman. … Where are sovereign …
6th June 2019
The $10pb fall in global oil prices over the past couple of weeks will improve the terms of trade for major EM oil importers, such as India, and will help to provide some relief for countries with weak balance of payments positions, such as Turkey and …
5th June 2019
The fall in the headline EM manufacturing PMI in May provides further evidence that EM GDP growth weakened in Q2. On a more a positive note, the surveys indicate that inflation is easing. … EM manufacturing slowdown continues in …
3rd June 2019
US tariffs on imports from Mexico would have major repercussions for Mexico’s economy, but any spillovers on other EMs through trade links are likely to be small. For the rest of the emerging world, the more important implications stem from what it means …
Sovereign dollar bond spreads widened much further in frontier markets than in other EMs over the past month on the back of concerns over fragile balance sheets. … Balance sheet fears escalate in frontier …
30th May 2019
Aggregate EM economic growth slowed to its weakest pace since the first half of 2016 in the first quarter of this year. Much of the weakness was concentrated in commodity-exporting EMs. The early signs suggest that EM growth remained soft at the start of …
24th May 2019
Headline EM inflation has risen in the last few months due to a sharp jump in food inflation. African Swine Fever could keep food inflation in China high into next year, although supply shocks elsewhere should unwind shortly. The increase in inflation may …
23rd May 2019
The weakness in EM commodity producers at the start of the year seems to reflect a coincidence of shocks, and probably won’t last. But the key point is that many commodity producers are yet to fully adjust to low prices, keeping underlying growth weak and …
20th May 2019
This month’s escalation of US-China trade tensions and renewed concerns about Argentina and Turkey’s economic vulnerabilities have clear parallels with 2018, when these same factors triggered a sell-off in most EM assets. But there are important …
16th May 2019
With the twists and turns in the US-China trade talks grabbing most of the headlines, the looming deadline for the decision on US auto tariffs as part of the Section 232 investigation has received less attention. While the exposure of most EMs’ auto …
14th May 2019
The latest increase in trade tensions between the US and China so far appears to have had a larger impact on EM currency markets than previous flare-ups in the trade war. But the impact of the latest developments on economic growth in major EMs, both …
13th May 2019
The rise in the US tariff rate on $200bn of imports from China that came into force today is only likely to have a small impact on China’s economy, let alone the rest of the emerging world. But regardless of how the trade war ultimately plays out, EM …
10th May 2019
Our Tracker suggests that EMs received positive (albeit small) net capital inflows in April. But fresh currency stress in Argentina and Turkey as well as concerns about renewed trade tensions suggest that inflows tailed off in the last few weeks. … …
8th May 2019
The drop in the headline EM manufacturing PMI in April was driven by weaker surveys out of all four BRIC economies. The breakdown of Markit’s aggregate EM survey showed that the rebound in EM exports seen in February is unlikely to have been sustained. … …
2nd May 2019
The key determinants of EM political risk premiums are the type of political shock and the strength of an economy’s external balance sheet. With this in mind, Ukraine and Argentina have the greatest potential to suffer large and long-lasting political …
1st May 2019
Aggregate frontier market GDP growth probably slowed to its weakest pace since early 2017 in Q1 and, while we think that this should mark the bottom of the cycle, activity in most frontiers will remain sluggish over the next couple of years. … Growth in …
30th April 2019
The recent sell-off in EM currencies has grabbed the headlines but in truth, aside from the Argentine peso and Turkish lira, the moves have been relatively limited. This Update highlights three key points. … Three key points on the latest EM currency …
The sell-offs in the Argentine peso and Turkish lira have sparked fears of broader turmoil in EM financial markets. But, so far at least, this has yet to materialise. Sovereign dollar bond spreads have actually narrowed over the past month in most major …
29th April 2019
Economic growth in the emerging world appears to have slowed further in the first quarter of this year, to its weakest pace since Q2 2016. Early indicators suggest that activity picked up at the end of the quarter, although we doubt that this is the …
26th April 2019
Turkey’s central bank seems to react like clockwork by tightening monetary policy when the lira falls sharply, but other EM central banks respond much less frequently than is commonly believed. Most will only tend to respond to a currency fall when this …
24th April 2019
Having stagnated in February, there are tentative signs in the March data that the worst has passed for EM exports. But weakness in the global technology sector, lower commodity prices and soft global growth mean that EM exporters are likely to continue …
23rd April 2019
The rally in EM equities has continued over the past month, seemingly driven by the view that recent weakness in the global economy will not last, as policymakers in the US and China in particular engineer a recovery. But we are sceptical, and forecast …
17th April 2019
Our Tracker suggests that overall EM capital outflows eased markedly in Q1. However, we think that positive sentiment towards EMs will start to turn over the coming quarters as worries about weak global GDP growth weigh on investor risk appetite, causing …
In our Risk Monitor published this time last year, we warned about growing risk of crises in Turkey and Argentina. The likelihood of full-blown currency crises occurring in the emerging world now seems much lower. But there are a handful of countries, …
16th April 2019
Rising automation, excellent infrastructure and the migration of some productive capacity into the cheaper interior mean that China is likely to remain a highly competitive export manufacturing centre over the coming years. This will make it much harder …
10th April 2019
The emerging world has entered its first synchronised downturn since 2015. Our growth forecasts remain below consensus in nearly all major EMs. With growth slowing and inflation near a decade low, EM central banks are likely to cut interest rates further …
5th April 2019
The rise in the aggregate EM manufacturing PMI at the end of last quarter suggests that the slowdown in EM industrial production growth may have bottomed out. … EM manufacturing improves at the end of …
1st April 2019
Frontier market currencies have fared better than their emerging market counterparts during the recent market turmoil. But their balance sheets are generally much weaker, making currencies vulnerable to large falls. Indeed, some of the biggest declines we …
28th March 2019
The slowdown in EM GDP growth over the second half of 2018 worsened at the start of this year. EM GDP growth in Q1 is shaping up to be the weakest since Q4 2016. … EM GDP growth slowing in …
27th March 2019
A spell of relative calm for EM currencies was broken this month, as several including the Argentine peso, Turkish lira, Brazilian real and South African rand fell sharply, despite a more dovish US Fed. This weakness can partly be pinned on domestic …
22nd March 2019
The most notable explanation behind the recent sharp slowdown in EM export growth is the fall in commodity prices. But there are signs that softer global demand has also taken its toll. … Picking apart the EM export …
20th March 2019
The slump in EM exports deepened in the first few months of 2019, and with headwinds from low commodity prices and slower global growth likely to persist, we expect exports to remain extremely weak this year. A trade deal between the US and China would, …
15th March 2019
The rally in EM assets of the past few months has started to falter in recent days on the back of some poor economic data around the world, and signs that a US-China trade deal may be further away than previously thought. We forecast that EM assets will …
14th March 2019
The rise in EM sovereign foreign currency bond sales this year has been concentrated in larger EMs with relatively strong balance sheets. We are more concerned about heavy foreign currency public debt burdens – a legacy of FX bond sales in previous years …
13th March 2019
Current account deficits have started to narrow in many major EMs, most notably Turkey and Argentina, reducing the risk of large currency sell-offs. That said, there are a few countries, such as Ukraine and Romania, with relatively large deficits that …
12th March 2019
Our Tracker suggests that overall EM capital outflows eased in February, mirroring the broader improvement in investor sentiment towards the emerging world. But more timely data indicate that this was reversed in early-March – a trend which is likely to …
8th March 2019
The broad tailwinds that lifted growth across the emerging world over the past two decades won’t be repeated and, as a result, GDP growth will be around 2%-pts weaker over the next 20 years. Income convergence with the developed world will continue, but …
7th March 2019
EM inflation slowed to its weakest pace since the Global Financial Crisis in January and it will remain lower over the course of the year in most countries. This is likely to prompt policymakers to loosen monetary conditions. … EM inflation at …
4th March 2019
The EM manufacturing PMI picked up last month, but we think that growth in the manufacturing sector will still slow in the coming months. … Upturn in EM manufacturing won’t be …
1st March 2019
The monetary tightening cycles that began last year in many of the large EMs are petering out fairly quickly. But in many of the smaller Frontier markets, interest rate hikes are still at the top of the agenda. … External pressures keep frontiers in …
27th February 2019
The lesson from Turkey over the last few years is that it takes time for political pressure on the central bank to have negative macroeconomic consequences. With this in mind, while recent developments in India are worrying, we are more concerned about …
