Filtered by Region: Emerging Markets Use setting Emerging Markets
Fears among investors have continued to grow that Egypt’s government will default on its debt in the coming years although, for now at least, there remains a path to avoid such an outcome. Taking that path will require the government to step back from …
18th May 2023
Having picked up sharply in April, inflows into EM bond and equity markets have weakened in the past few weeks. Inflows into India and Turkey remained strong over the first half of the month, but in the latter this is likely to reverse after the …
16th May 2023
The sharp rise in unsecured bank lending has probably helped to support consumption and boosted bank profitability over recent quarters. But it also leaves the banking sector at risk of rising defaults, a concern that is exacerbated by the relatively low …
Turkey’s presidential election on Sunday was close, but Erdogan performed better than recent polls had suggested and he now has the edge ahead of a second round run-off on 28 th May. Hopes of an opposition victory and a return to orthodox policymaking …
15th May 2023
Sovereign debt risks are back in focus as some frontiers appear to be drifting closer to default. We remain most concerned about default risks in Tunisia and Pakistan, particularly in light of this week’s unrest and IMF deals now appear further away. Debt …
12th May 2023
The looming impeachment trial of Ecuador’s president Guillermo Lasso marks a further intensification of the country’s political crisis and suggests that the recent experiment with market-friendly governments is on borrowed time. There are lots of ways in …
10th May 2023
Most EM central banks have drawn their monetary tightening cycles to a close now and, if history is any guide, it looks like the conditions will be in place for an easing cycle to start from around July/August. EM central banks were quick off the mark to …
Note: We discussed Turkey’s election in an online briefing on 10th May. Watch it here . There’s a lot of optimism that the opposition will emerge victorious in Turkey’s elections, which would pave the way for a return to orthodox economic policy. Were …
Flash GDP figures showed that Saudi Arabia’s economy contracted in Q1 on the back of OPEC+-agreed oil output cuts, but growth in the non-oil economy remained strong. The “voluntary” oil production reductions announced last month will continue to weigh on …
9th May 2023
The manufacturing PMIs for April suggest that industrial activity softened in most EMs last month and that external demand generally remained weak. The one crumb of comfort is that price pressures eased further last month. The aggregate Emerging Market …
4th May 2023
The idea of a new BRICS currency to settle trade or hold in reserves instead of the dollar has been doing the rounds recently. This could be modelled on the IMF’s Special Drawing Rights. But getting India on board with China would be difficult. And if the …
The Czech central bank (CNB) left its main policy rate on hold at 7.00% as expected today, but it looks like policymakers set out to strengthen their hawkish rhetoric and downplay expectations of an imminent cut in interest rates. The message was loud and …
3rd May 2023
Note: We'll be discussing Turkey's election in an online briefing at 09:00 EDT/14:00 BST on 10th May . Register here . Parliamentary and presidential elections on 14 th May will make or break macroeconomic stability in Turkey. As things stand it looks …
Note: We’re holding a special 20-minute online briefing all about EM debt risks this Thursday at 10:00 EDT/15:00 BST . Register now . Egypt’s balance of payments (BoP) position strengthened markedly late last year, but policymakers’ reluctance to live up …
2nd May 2023
Inflows into EM bond and equity markets have picked up sharply in the past month, with flows into Asian equity markets looking particularly strong. That said, if we right that the dollar will rebound, we suspect that these inflows will drop back. That’s …
27th April 2023
The Hungarian central bank (MNB) slashed the upper end of its interest rate corridor today by 450bp, to 20.50% and, while this move alone won’t loosen monetary conditions, it is likely to be followed by cuts to the effective policy rate (the overnight …
25th April 2023
Large current account deficits across CEE have started to narrow in recent months and we think that this will continue as slowing economies and lower energy prices shrink import bills. This will reduce vulnerabilities, but external risks and currency …
20th April 2023
Our dataset on inflation expectations across EMs shows some encouraging falls recently and supports our view that, with EM inflation likely to fall further, monetary easing cycles will start in the coming months. However, inflation expectations remain …
19th April 2023
The increasingly diverse array of creditors to debt-distressed EM governments – and the difficulties in getting China and Western lenders to see eye to eye – is already gumming up sovereign debt restructurings. And despite some positive noises from the …
17th April 2023
The raft of EM CPI figures out this week show that headline inflation is, in aggregate, finally starting to fall significantly, and we expect it to decline further in the coming months. But core inflation is easing relatively slowly, and remains …
13th April 2023
We’re not convinced by the arguments currently doing the rounds that military spending in Russia artificially boosted GDP in a significant way last year. While military spending has increased further this year and manufacturing in military-oriented …
12th April 2023
The RBI’s decision to keep the repo rate on hold at 6.50% today belied the central bank’s recent hawkish communications. The door remains ajar for hikes in the future but with headline inflation set to fall back to within the RBI’s 2-6% target range …
6th April 2023
The widening in India’s current account deficit last year, to 2.4% of GDP, was not as significant as many had feared in the context of the surge in commodity prices. Looking ahead, we think the deficit will narrow over the coming quarters as domestic …
4th April 2023
Note: Join our 6 th April online briefing all about the risks to EMs from banking turmoil. Register now . The manufacturing PMIs for March made for pretty downbeat reading in most EMs and the outlook for the coming months remains lacklustre. One source of …
3rd April 2023
Israel’s central bank (BoI) raised its policy rate by a smaller 25bp, to 4.50%, as expected today and its communications sounded slightly less hawkish than at its previous meeting. Inflation pressures are likely to remain strong this year, but the door …
Note: We’ll be discussing the OPEC+ decision and answering your questions in an online briefing at 10:00 EDT/15:00 BST today . Register here . The surprise announcement of a further 1.66mn bpd cut to oil output by OPEC+ will reduce GDP growth mechanically …
Join our 6 th April online briefing all about the risks to EMs from banking turmoil. Register now . The broad message from the recent spate of EM central bank meetings is that policymakers are still focussed on reining in inflation even as the global …
31st March 2023
Even if the banking sector turmoil doesn’t grow into a broader economic crisis, we still think equities in emerging markets (EMs) will struggle over the next couple of quarters in local-currency (LC) terms. Since confidence in the financial sector started …
22nd March 2023
Turkey’s banking sector has been one of the weak links in the EM world in recent years due to its very high external debt burden. The good news is that banks have paid down these external debts and built up their FX liquidity buffers since 2018. This has …
Spillovers from the global banking crisis to EMs appear limited so far. Encouragingly, too, most EM banks appear to be well placed to weather a period of rising non-performing loans resulting from weaker growth and higher interest rates. That said, there …
21st March 2023
EMs, in general, don’t appear to have suffered large capital outflows over the past 10 days or so amid the turmoil in the global banking sector. But some countries with large current account deficits (Chile, Colombia, Hungary) have seen their currencies …
20th March 2023
A key channel through which emerging markets could be affected by the strains in the global banking sector is if lending by foreign banks falls sharply. On this front, EMs’ vulnerabilities have eased since the Global Financial Crisis. But there are still …
16th March 2023
At the time of writing, financial markets appear to be stabilising after the turmoil caused by the collapse of SVB. And it doesn’t look like EMs have suffered large capital outflows or strains in their banking sectors. If this relatively benign scenario …
14th March 2023
The South African rand has weakened sharply against the US dollar so far this year, markedly underperforming other emerging market (EM) currencies. We expect domestic and global headwinds to drive a bit more depreciation, to 19.0/$, later this year. But …
9th March 2023
We think MSCI’s India Index will fall over the next couple of quarters in local-currency (LC) terms, amid subdued domestic economic activity and a general deterioration in investors’ appetite for “risky” assets. While it was among the best performers in …
The National Bank of Poland (NBP) left its main policy rate on hold as expected today, at 6.75%, and we don’t think policymakers will rule out further rate hikes just yet (today’s statement gave little away in terms of guidance). But with inflation likely …
8th March 2023
Non-performing loan (NPL) ratios have risen by as much as 4-5%-pts during non-banking crisis downturns in EMs in the past. This time around, there are reasons to think that the increase will be smaller and EM banks generally look well placed to cope. But …
6th March 2023
As political risks appear to be largely discounted by investors, we expect the Colombian peso to outperform other major EM currencies over the next couple of years. Although the Colombian peso is broadly unchanged against the greenback so far this year, …
2nd March 2023
The Israeli shekel has been amongst the worst performing currencies over the past month amid a rise in risk premia in Israel. We think it may remain under pressure against the US dollar over the coming months; but we doubt it will keep underperforming its …
1st March 2023
The manufacturing PMIs for February remained very weak in most EMs, but they did at least provide signs that industry across much of the emerging world has fared better so far this year than it did in late 2022. Meanwhile, there were encouraging signs …
Last week’s European Court of Justice (ECJ) opinion on Poland’s Swiss franc mortgage dispute dealt yet another blow to Poland’s banking sector and will expose those banks with large FX loan portfolios. The sector as a whole looks strong, but many banks …
23rd February 2023
Figures released today highlight the dreadful demographic outlook facing Korea, with the population (excluding migrants) falling for a third year in a row. Poor demographics are the key reason why we expect trend growth in Korea to continue slowing over …
22nd February 2023
Russia’s budget deficit has widened sharply in recent months and is likely to remain under pressure amid lower oil prices and rising military spending. The government is unlikely to experience severe fiscal strains this year, but the public finances are …
21st February 2023
Nigeria’s presidential election this weekend could be one of several EM elections this year (including Turkey and Argentina) that see opposition victories and a turn away from unorthodox policymaking. The experience from elsewhere in the emerging world is …
The Bank of Israel (BoI) hiked interest rates by another 50bp, to 4.25%, today and while it continued to point to signs of slower growth, it sounded more concerned about the strength of inflation than it did at its last meeting. It now looks likely that …
20th February 2023
EM investment surged far above pre-pandemic levels last year, but there was a clear divergence across countries and we think investment growth will slow in 2023. One worrying development is that investment has continued to lag behind in countries where it …
We expect MSCI’s Brazil Index to drop over the next couple of quarters in local-currency (LC) terms, before it begins to recover towards the end of this year. Since end-October, equities in Brazil have generally underperformed equities in other major …
17th February 2023
EM core inflation jumped to its highest rate in almost two decades in January. That can partly be pinned on China, where core inflation has risen from a very low rate. In most other EMs, core inflation has passed its peak, which should allow policymakers …
16th February 2023
The raft of EM central bank meetings over the past couple of weeks reinforces the view that monetary tightening cycles have now drawn to a close or are very close to doing so, several months earlier than in their DM counterparts. Policymakers in some EM …
10th February 2023
Foreign capital inflows have been soft this year in spite of the improvement in the economic outlook for EMs and the weaker dollar. And the very latest data suggest that capital has flowed out of EMs recently, which is a trend that we think is likely to …
9th February 2023
