Filtered by Region: Emerging Markets Use setting Emerging Markets
The rocket strike on the Israeli-occupied Golan Heights over the weekend has heightened fears of a full-blown conflict between Israel and Hezbollah in Lebanon. For Israel, this risks adding to pressure on its already strained public finances, and would …
29th July 2024
A growing number of EMs have adopted fiscal rules to improve investor confidence in the management of their public finances. But the recent deterioration in fiscal health in some EMs has led to the breach (or at least threat of a breach) of these rules. …
23rd July 2024
Easing cycle continues The Hungarian central bank (MNB) cut interest rates by 25bp again today, to 6.75%, and the post-meeting press conference suggests that, while there are some MPC members who want to pause the easing cycle, the balance is a bit more …
The electricity blackouts that have blighted Egypt this summer may be nearing an end. But in the absence of new major gas discoveries, in the longer run rising energy demand will result in renewed balance of payments problems from higher imports or will …
Finance Minister Nirmala Sitharaman has shown a commitment to fiscal consolidation while for the most part placating the BJP’s coalition partners in today’s FY24/25 Union Budget announcement. There is always a chance of fiscal slippage, but recent success …
The complete Third Plenum “Decision” document provides interesting details on the leadership’s reform agenda across a range of areas. Overall though, it reinforces the central message in last week’s initial Plenum communiqué: Xi Jinping continues to place …
22nd July 2024
The South African Reserve Bank’s decision to leave its repo rate unchanged at 8.25% was of little surprise but there was increased optimism on the MPC that inflation is moving towards the 4.5% mid-point of the target and that inflation expectations are …
18th July 2024
China’s leadership has promised to continue comprehensively deepening reform in a wide range of areas. But there are few signs that the just concluded Third Plenum marks a major change in the direction of policymaking. And there still appears to be a …
The policy shift underway in Nigeria has kept economic growth subdued – something that continued in Q2 according to the latest PMI and confidence data. Tight monetary policy will still remain a constraint on the economy. But with inflation soon set to …
South Africa is struggling to emerge from its recent trend of sluggish economic activity, with stronger outturns in the retail sector being offset by weakness in industry. Nonetheless, we think momentum will build over the coming quarters on the back of …
17th July 2024
The upside surprise to headline consumer price inflation last month has all but ended hopes of a rate cut at the RBI’s August policy meeting. But we think that the conditions will be in place for policy loosening to begin in December. To recap, headline …
16th July 2024
Recent protests in Kenya have dealt a heavy blow to President Ruto’s fiscal consolidation plans and, with the president dismissing the cabinet yesterday as he tries to cling on to power, it looks increasingly likely that the government will struggle to …
12th July 2024
Net capital inflows into EMs remained positive over the past month, largely reflecting continued strong inflows into EM bonds, particularly Turkey, while there were out flows post-election in Mexico and South Africa. Policy turnarounds in some EMs and …
11th July 2024
Saudi Arabia’s GDP growth is likely to pick up, and markedly so in 2025. But that will be driven by rising oil output. We think that activity in the non-oil economy will slow. Indeed, there are signs in the low-profile data that this has already started …
At first sight, the latest CPI data out of Central and Eastern Europe (CEE) might seem to provide central banks reason for comfort. But a look under the surface paints a more worrying picture: underlying core price pressures in some countries have re …
10th July 2024
Exports from Taiwan, Korea and Vietnam have surged over the past 18 months, thanks to strong demand for AI-related products and friendshoring. In contrast, shipments from the rest of the region have struggled. We expect this divergence to continue over …
Turkey’s economy has maintained strong external price competitiveness since the pandemic (mirrored by rapid export growth). But measures of competitiveness have shown a noticeable decline in the past year and will deteriorate further against a backdrop of …
9th July 2024
Much of the strength of India’s external position over recent years can be explained by robust growth in its services exports, in particular its business process outsourcing (BPO) sector. The near-term outlook for the sector is bright. But the sector also …
Egypt’s government faces a likely further rise in debt servicing costs over the coming year. But the good news is that the budget for the 2024/25 fiscal year (which started this week) reaffirmed the commitment to fiscal consolidation. So long as the …
3rd July 2024
One of the takeaways from our latest Emerging Markets Outlook is that the EM business cycle is unusually unsynchronised. We expect some convergence as the effects of the enormous macro shocks of recent years wash out. But by the same token, we shouldn’t …
The recently-published fiscal plans of Colombia’s government seem to have alleviated some near-term fiscal concerns, but we think the medium-term budget and debt projections are based on rosy assumptions around growth and oil prices. Policymakers’ (and …
2nd July 2024
The EM manufacturing PMI rose to a three-year high in June, driven by improvements in the surveys in much of Asia which have continued to benefit from strong export demand. Manufacturing recoveries are progressing more slowly in parts of Europe. The PMIs …
1st July 2024
Saudi Arabia’s Crown Prince Mohammed bin Salman’s (MbS) ultimate succession to become king is inevitable and a formality. Having been the de-facto leader of the Kingdom for several years it may not result in much of a deviation in economic policymaking. …
Surveys likely understate health of manufacturing sector This report was first published on Monday 1 st July covering the official PMIs and the Caixin manufacturing PMI. We added commentary on the Caixin services and composite PMIs on Wednesday 3 rd July. …
Monday marks the 30 th anniversary of the introduction of Brazil’s currency, the real, as part of a stabilisation plan (the Plano Real ) which successfully tamed runaway inflation. For other EMs facing similar problems, most notably Argentina, the key …
27th June 2024
CNB cuts by larger-than-expected 50bp, but delivers hawkish guidance The decision by the Czech National Bank (CNB) to deliver another 50bp cut to its policy rate today, to 4.75%, was a dovish surprise to most analysts (although not ourselves). That said, …
Our China Activity Proxy suggests that economic growth weakened in May on the back of a fall in services activity. Industry also slowed, following months of outperformance. We doubt this marks the start of a downturn just yet – fiscal stimulus and strong …
24th June 2024
Latin American assets have generally underperformed those elsewhere of late, in part driven by rising risk premia on the region’s assets. We think these risk premia may rise further over the coming year or so, given our downbeat view on economic growth in …
21st June 2024
The G7 loan to Ukraine announced last week and the narrowing window to approve a new debt relief package once the payment suspension with private creditors ends in August has shone the spotlight on Ukraine’s large external financing needs. This Update …
20th June 2024
The outcomes of the EM central bank meetings over the past 48 hours or so underscore the point that, while the EM monetary easing cycle is likely to continue over the coming quarters, it will no longer be led by Central Europe and Latin America. Central …
The European Commission’s recommendation to open the Excessive Deficit Procedure (EDP) against Poland, Hungary and Slovakia for breaching the EU’s fiscal rules won’t force a drastic change in policymaking, nor will it deal with the structural factors …
19th June 2024
The Monetary Policy Report released by Chile’s central bank today alongside the communications to yesterday’s policy meeting suggest that the easing cycle over the next few quarters will be stop-start. We now expect a pause at the central bank’s next two …
Easing cycle slows again, limited room for rate cuts in H2 The communications accompanying the decision by the Hungarian central bank (MNB) to cut its base rate by a smaller 25bp today, to 7.00%, were fairly hawkish and support our view that the base rate …
18th June 2024
Net capital inflows into EMs have climbed back into positive territory in recent weeks, driven by a sharp rise in foreign investors’ purchases of Turkish government debt. This strength could continue if investor confidence in the country’s policy shift is …
11th June 2024
The ramp-up in public capital expenditure in the last five years has helped to ease some of the bottlenecks that had previously acted as a constraint on India’s economy. Despite the Modi government’s weakened electoral mandate, there are good reasons to …
Although we expect equities in general to fare well over the next year or so, we think that falls in most commodity prices will weigh on the energy and materials sectors. That would be bad news for stock markets with big energy/materials exposure and …
10th June 2024
Mexican President-elect Claudia Sheinbaum’s strong environmental credentials mean that a shift away from fossil fuels and towards renewables is likely during her tenure. We doubt that she’ll fully open up the energy sector to private investment and think …
The State Bank of Pakistan (SBP) kicked off its easing cycle today with a 150bps rate cut, and while further cuts are likely, ongoing negotiations with the IMF for a new long-term loan deal mean that the pace of further loosening is likely to be …
The RBI kept the repo rate on hold at 6.50% today as expected but, notably, two of out of the six MPC members voted for a cut. With inflation likely to continue falling over the coming months, we maintain our long-held view that the easing cycle will …
7th June 2024
Aggregate EM GDP growth remained strong in Q1, though we still expect a slowdown later this year. At a regional level, Emerging Asia will lead the pack, however there are tentative signs that recoveries in parts of Central and Eastern Europe and Latin …
6th June 2024
Narendra Modi will begin his third term as India’s Prime Minister with a weakened mandate and that will make the passage of contentious economic reforms more difficult. But he will still be able to work as the head of a stable coalition, and the broader …
4th June 2024
Global demand is giving a bigger boost to China’s economy than we had anticipated this year and foreign tariffs will make little difference to aggregate export performance in the near term. We now think that China’s economy will expand 5.5% this year as a …
The EM manufacturing PMI remained at a three-year high in May but the picture is becoming increasingly nuanced at a country level. Meanwhile, the PMIs also showed price pressures rose again last month, matching the signs of recent strength seen in other …
3rd June 2024
Our initial response to Claudia Sheinbaum’s victory in Mexico’s presidential election can be found here . We also held a Drop-in earlier today. This Update summarises the key points that we discussed and answers some of the client questions that we …
The decision by OPEC+ to keep oil production lower over the rest of this year means that oil sectors in the Gulf will grow more slowly than we had previously anticipated and we have revised down our GDP growth forecasts for this year and next. The …
This report was first published on Friday 31st May covering the official PMIs. We added commentary on the Caixin manufacturing PMI on Monday 3rd June and the Caixin services and composite PMIs on Wednesday 5th June. Recovery still ongoing The PMIs for May …
31st May 2024
Sovereign bond yields in Russia have surged to multi-year highs this year as markets have increasingly questioned the trade-off between the war effort on the one hand and policymakers’ ability to maintain fiscal stability and control inflation on the …
29th May 2024
A victory for Claudia Sheinbaum in Mexico’s election on Sunday is likely to see a continuation of Amlo’s generous social policies – which will also make Banxico’s fight against inflation harder. The main points of contrast with Amlo are that she will face …
Resolution of China’s property crisis would result in residential sales being substantially higher than today. Sales could rise by a third. But we wouldn’t expect prices to increase by much, if at all. And property construction activity will be weaker in …
24th May 2024
The sharp drop in frontier market sovereign dollar bond spreads this year has caught many by surprise. We think there’s a case that the bond rally may have gone too far in Argentina, Ecuador and Tunisia. But the decline in spreads in some frontiers, …