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Worries about the impact on other emerging economies of a slowdown in China have risen back to the top of the agenda over the past month. While we do not believe a hard landing is likely, we do expect growth in China to slow further this year and next as …
19th March 2014
Having been the darling of international investors over the past couple of years, a number of “frontier markets” have been cast in a negative light recently. In this Update, we take a step back to make some general observations about frontier markets …
14th March 2014
The past few days have seen renewed fears of a hard landing in China ripple through EM financial markets. These fears are nothing new and have in fact resurfaced at a time when EM export growth to China has edged up a little. Our view remains unchanged: …
13th March 2014
Despite the crisis in Ukraine, which has hit some currencies and assets in Emerging Europe hard, there are signs that investors are rediscovering an appetite for investing in selected emerging markets. For example, the total return from the MSCI Emerging …
12th March 2014
Export growth was more or less flat at an EM-wide level in January, but there’s a growing divergence at a country level, with highly-open manufacturing economies in Central Europe and East Asia outperforming. By contrast, commodity producers are faring …
10th March 2014
Emerging market (EM) manufacturing appears to have lost some momentum last month. But while manufacturing PMIs have slumped in both Emerging Asia and Latin America, manufacturers in Emerging Europe appear to be faring much better. … Emerging European …
4th March 2014
EM GDP growth has remained stable at around 4.5% y/y in recent months, but this has masked a shift in the fortunes for individual regions. Emerging Europe appears to be experiencing a relatively strong recovery. In contrast, while Asia remains the fastest …
28th February 2014
The eruption of anti-government protests in several emerging economies over the past month has led many investors to add “political risk” to the lengthening list of reasons to be cautious on EMs. But in truth political risk has always been an issue for …
25th February 2014
The EM recovery is still struggling for momentum, with our GDP tracker suggesting that the upturn in growth seen in mid-2013 may have stalled. On the positive side, it seems unlikely that the most recent bout of market turmoil will have a significant …
20th February 2014
In contrast to the BRICs, where economic growth is likely to disappoint without structural reform, there are parts of the emerging world where recent economic reforms should provide a major boost to growth over the next decade. Four countries that we …
19th February 2014
“Frontier” currencies have been the hardest hit in the latest bout of EM financial market turmoil. Looking ahead, we think further exchange rate weakness is likely to be concentrated in those countries that have already seen the sharpest falls – …
17th February 2014
Surprisingly strong export growth from China last month has raised hopes of a broader recovery in EM exports. However, the country level data suggest that export performances are highly uneven, with the fastest growth coming in the highly-open …
12th February 2014
Like most other emerging market assets, dollar-denominated bonds have performed poorly over the past month. But they have at least fared better than they did during last summer’s sell-off. Spreads on both government and corporate securities have generally …
11th February 2014
The recent slowdown in the major BRIC economies has been driven largely by structural factors, meaning that a new wave of reforms is needed if they are to regain their vigour. But, as things stand, the likelihood of a big shift in policy over the coming …
10th February 2014
Emerging market (EM) manufacturing appears to have slowed last month but, perhaps more importantly, there is a widening divergence between countries. Activity seems to be picking up in the more open EMs, but it’s weakening in some of the larger economies …
6th February 2014
The emerging world may not be facing a re-run of the late-1990s, as some have suggested, but theprecarious position of some EMs makes it likely that several economies will run into trouble overthe next couple of years. Events remain in a state of flux but …
4th February 2014
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
