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It’s too early to say with any certainty what impact the current turmoil in financial markets will have on EM growth. But while we expect the countries that have been hit hardest in recent weeks – notably Turkey and South Africa – to struggle this year, …
30th January 2014
The decisions by Turkey and India yesterday to raise interest rates have inevitably led to speculation that market turbulence will force policymakers in other parts of the emerging world to follow suit. But while a handful of EM central banks could follow …
29th January 2014
Market turbulence in Turkey, Ukraine and now Argentina has led to talk of a new crisis sweepingemerging markets (EMs). But the emerging world has become a far more diverse place over the pastdecade. The real lesson from recent events is that the need for …
24th January 2014
The sharp falls in the currencies of the “fragile five” economies over the past half a year may cause import price inflation to rise over the next few months, particularly in Turkey and, to a lesser extent, in Indonesia. The bigger picture, however, is …
Despite concerns that the US Fed’s tapering of its asset purchases may force EM policymakers to hike interest rates, more EM central banks have loosened monetary policy over the past six months than have tightened. And while many EMs may now be nearing …
23rd January 2014
Six months ago there were hopeful signs that growth in the emerging world might finally be picking up. But our GDP tracker suggests the upturn in growth seen in mid-2013 may have faltered in the final months of last year. This is likely to set the scene …
17th January 2014
EM consumer spending grew at its slowest pace since 2009 last year. However, the latest data suggest that spending has started to pick up in recent months and, while a significant upturn seems unlikely, we do expect spending to accelerate further over the …
16th January 2014
Most analysis of EM vulnerabilities to Fed tapering and the likelihood of tougher external financing conditions over the coming years has focussed on the size of a country’s current account deficit. But the risks posed from mounting levels of external …
15th January 2014
Fears about the impact of Fed tapering on Ems have eased in recent months, but the economic data have remained weak. Indeed, our GDP Tracker suggests that growth remains stuck at a four-year low. Looking ahead, three factors are likely to determine …
10th January 2014
Our central forecast is for another year of lacklustre growth in the emerging world in 2014. But, as always, there are risks to our forecast - both on the upside and downside. Most attention has inevitably focussed on the uncertainties surrounding the …
8th January 2014
EM export growth continued to gather pace in November and forward-looking indicators suggest that the recovery has further to run. There are signs that the trade balances of the “fragile five” EMs have started to improve. However, this has mainly come …
7th January 2014
Our EM-wide manufacturing PMI edged down last month, but industry still appears to have ended 2013 stronger than it was in the third quarter of last year. At a regional level, activity accelerated in Latin America, while it slowed in Emerging Europe and …
3rd January 2014
For all the recent talk of a “Great Deceleration”, we think that the bulk of the slowdown in EM growth has already happened. Growth in aggregate next year looks set to be broadly unchanged from 2013. However, this masks important differences between …
19th December 2013
Fed tapering may trigger more turbulence in Emerging Market (EM) asset prices over the coming days and months, but the latest Capital Economics Risks Indicator (CERI) suggests that tighter global monetary conditions will not trigger a systemic crisis. …
18th December 2013
Our GDP Tracker suggests that having accelerated in Q3, EM growth levelled out at the start of Q4. Although we wouldn’t read too much into one month’s data, this is likely to set the scene for 2014. We expect growth to remain stuck at its current rate of …
With almost a complete set of Q3 GDP data now available, we estimate that aggregate EM growth edged up to 4.8% y/y, from 4.7% y/y in Q2. At a regional level, growth accelerated in Emerging Europe and Emerging Asia, but it fell back in Latin America. And …
13th December 2013
The EM export recovery continued in October, led mainly by net commodity importers. Various indiciators point to gradually improving export conditions, suggesting further gains in the months ahead. But despite the media hype, we doubt that the WTO …
Emerging market assets have suffered since mid-October from renewed speculation that the US Fed will taper its asset purchases sooner rather than later. Both equities and bonds have sold off over the past month, particularly in Latin America. But the …
10th December 2013
We have previously identified six emerging markets where credit growth appears to be unsustainable: Brazil, China, Hong Kong, Singapore, Thailand and Turkey. In the event of a crisis, past experience suggests that the authorities would have to tighten …
9th December 2013
The shift in China's growth model that has been signalled by its leadership would benefit many economies elsewhere in the emerging world while causing difficulties for others. Major commodity producers, particularly South Africa, Chile, and Brazil, are …
6th December 2013
Each of the five countries that were the worst hit by the summer currency sell-off (the so-called “Fragile Five”) are due to hold important elections next year. In the short term, uncertainty ahead of the elections is likely to weigh on sentiment towards …
4th December 2013
Manufacturing in the emerging world remains on course for a fairly strong final quarter of the year. Our EM-wide manufacturing PMI, based on data produced by Markit, is consistent with industrial output growth accelerating to around 6% y/y from 4% y/y in …
3rd December 2013
Our GDP Tracker suggests that although EM growth has probably picked up a little recently, it is too soon to talk about a meaningful rebound. Signs of recovery are strongest in Emerging Asia. Meanwhile, growth in Latin America and Emerging Europe remains …
28th November 2013
EM exporters appear to have benefited from the recent investment-led rebound in China. But with China's infrastructure spending now easing again and policymakers determined to rein in credit growth, investment looks set to slow. Further ahead, the …
22nd November 2013
EM currencies have resumed their rollercoaster ride over the past couple of weeks – first weakening on the back of renewed expectations that the Fed might start to taper its asset purchases by the end of the year and then rebounding following what were …
19th November 2013
Currency movements will continue to play a major part in determining emerging market (EM) monetary policy. Countries where currencies have weakened alongside large current account deficits - Brazil, India, Indonesia and Turkey - look set to maintain …
15th November 2013
We wouldn't read too much into the slowdown in EM export growth in September. The monthly data are volatile and there are already signs that exports rebounded in October. Nonetheless, EM export growth remains weak by historic standards and commodity …
14th November 2013
A raft of strong activity data from the US suggests that the recovery there is gaining momentum. We expect growth in the US to accelerate further over the coming quarters. The biggest beneficiaries in the EM world will be the more open economies in Latin …
12th November 2013
The small rise in most emerging market equities over the past month was eclipsed by the 4% or so rise in developed market equities. So far in 2013, emerging equity markets have underperformed developed markets by over 15%. This is a greater degree of …
We’ve voiced concern about the pace of credit growth in a number of EMs. Worryingly, the composition of banks’ funding appears to have deteriorated at the same time, most notably in Turkey, but also in Thailand and, to a lesser extent, in Brazil and in …
8th November 2013
Falling global food prices should keep food inflation subdued across much of the emerging world over the coming months. Emerging Europe and Latin America in particular are likely to see significant falls in food inflation. This should relax pressure on …
6th November 2013
Manufacturing across the emerging world appears to have made a strong start to Q4. Our EM-wide PMI estimate, based on data produced by Markit, is consistent with a pick-up in industrial production over the coming months, with most EM economies showing …
4th November 2013
Our GDP Tracker suggests that EM growth was probably unchanged from Q2 in the third quarter. Although there is evidence of a recovery in Emerging Asia, growth in Latin America probably slowed in Q3. Meanwhile, growth in Emerging Europe remains weak, due …
31st October 2013
Our view that the major BRIC emerging markets were heading for a period of permanently weaker growth looked bold when we set it out a little over a year ago, but it has now been adopted by the mainstream. Nonetheless, we think that, in several important …
30th October 2013
Consumer spending growth appears to have picked up in large parts of the emerging world over the past couple of quarters but Emerging Asia has bucked the trend and spending growth there has continued to slow. Looking ahead, consumer spending in the …
23rd October 2013
Having been spectators to the credit crisis that has gripped the developed world since 2008, debt problems now seem to be building in several major EMs. There are good reasons to think that the economic fallout may be less severe than in previous EM …
22nd October 2013
The currencies of the so-called “BIITS” (Brazil, India, Indonesia, Turkey and South Africa) have been singled out as being particularly vulnerable to a tightening of global monetary conditions. This is on account of their respective countries’ large …
21st October 2013
The past month has brought signs of stabilisation across the emerging world. EM financial markets largely shrugged off concerns over a possible US default and regained some of their lost ground following this summer's sell-off. Meanwhile, the recent …
17th October 2013
The IMF has downgraded its expectations for growth in the BRICS over the next couple of years, bringing its forecasts into line with our own. But while at face value the Fund expects growth to rebound further ahead, we think that weakness in the BRICS is …
15th October 2013
Emerging market currencies in all the major regions have generally risen against the dollar since this time last month. Those of countries in Emerging Europe have fared the best on average, although the strongest performer has actually been the Brazilian …
14th October 2013
The most recent Emerging Market (EM) trade data show that export growth maintained its upward trend in August. Forward-looking indicators point to further gains over the year ahead. … Continued recovery in EM …
11th October 2013
A default by the US government would be without precedent and the potential spillovers to emerging markets are unclear. Nonetheless, it seems likely that the same EMs that were hit during the summer sell-off that followed fears of Fed tapering would be …
10th October 2013
Financial markets have awakened to the vulnerabilities in the emerging world. These are real and will weigh on growth in the years ahead. But we believe that the doomsayers will be proved wrong – an imminent crisis in the emerging world is unlikely. … …
8th October 2013
Our EM-wide PMI suggests that the recovery in EM manufacturing continued at the end of Q3. However, the improvement is uneven. The rebound was most prominent in Emerging Europe, helped by the strengthening of key euro-zone trading partners. But in some of …
2nd October 2013
Suggestions that policymakers in troubled emerging markets (EM) now have a window of opportunity to reduce external vulnerabilities before the Fed begins to taper miss the point that these countries’ problems are largely structural. The reforms required …
27th September 2013
Despite recent talk of a “Great Deceleration” in the emerging world, our GDP Tracker suggests that EM growth has stabilised – albeit at a weak pace – over the past few months. … Talk of “Great Deceleration” overlooks recent …
26th September 2013
Financial markets across the emerging world have rallied in the wake of the Fed’s decision to delay QE tapering, easing concerns that several EMs were on the cusp of currency crises. As it happens, these fears were probably overdone. It’s worth noting …
20th September 2013
The Fed’s decision yesterday not to taper its asset purchases just yet provides some breathing room for the more troubled emerging economies. But their structural problems remain and uncertainty about the outlook for Fed policy has arguably now increased, …
19th September 2013
We expect the Fed to announce a small reduction in its asset purchases at the conclusion of today’s FOMC meeting. In this Update we revisit the implications for EMs and explain why, despite the market turbulence of recent months, the economic impact …
18th September 2013
The most recent Emerging Market (EM) trade data show that export growth accelerated in July. What’s more, on the basis of the latest leading indicators, a further improvement in EM exports looks probable in the coming months. … Signs of improvement in …
