Filtered by Region: Emerging Markets Use setting Emerging Markets
The People’s Bank’s policy announcements today will provide only a small boost for China’s economy. Meaningful improvements in household or corporate borrowing would require substantial rate cuts or a significant change in economic sentiment. Neither …
24th January 2024
Saudi Arabia’s government returned to running budget deficits last year and is likely to continue doing so. But these should be easily financed. Oil prices would probably have to fall sharply, to below $65pb, and remain there before the authorities need …
23rd January 2024
The fading energy crisis and the falls in inflation and interest rates generated a more positive mood about the economic outlook at Euromoney’s Central and Eastern European (CEE) forum in Vienna this week compared with last year. But ongoing labour …
18th January 2024
Capital inflows into EM bond and equity markets have eased off a little recently, but they are still running around their highest level in over three years. And taken together with the narrowing of current account deficits over the last year, it suggests …
The incidence of sovereign debt distress has fallen sharply across the emerging world in the last few months, but that doesn’t rule out the possibility of default in a handful of EMs. Tunisia looks most likely to do so, followed by Argentina and Ecuador, …
16th January 2024
We have long highlighted the risk in Dubai’s corporate sector and the large debts that government-related entities (GREs) have accrued. This Update provides our latest estimates of these debts. The key point is that GREs appear to have weathered the large …
One of the big questions in Kenya in 2024 is whether the government can meet a $2bn Eurobond repayment due in the middle of the year. An improving balance of payments position, alongside an enhanced IMF deal and other external financing, mean that it …
Communications from the governor of the National Bank of Poland (NBP) today suggest to us that policymakers could cut interest rates again at the central bank’s March meeting. But we think core inflation will remain above the central bank’s target until …
10th January 2024
Note: W e held a client briefing straight after the election weekend to discuss what the vote means for Taiwan and the global economy. View the on-demand recording here . China may respond to a victory for Tsai Ing-wen’s chosen successor in Saturday’s …
Aggregate EM GDP growth is set to slow in 2024, but as important as the overall story is understanding the different cycles that are playing out at a country level. We think some countries that performed surprisingly well last year (notably Mexico and …
9th January 2024
Given the thick smog covering parts of South Asia, forcing schools to shut down and disrupting activity, this Update takes a closer look into the economics of air pollution. Air pollution is mostly caused by the burning of fuels and biomass, vehicle …
8th January 2024
Output from Nigeria’s oil refinery sector has been in terminal decline, inflating the fuel import bill at a time when the economy is already suffering from a shortage of hard currency. The new Dangote refinery and President Tinubu’s broader plans to …
4th January 2024
In the past few years, Egypt’s economy has been hit by the successive impacts of the pandemic, the war in Ukraine, and, more recently, currency devaluations. With further currency falls on the cards, high inflation, and tightening of fiscal and monetary …
3rd January 2024
The emerging markets manufacturing PMIs for December were a mixed bag. The headline index stagnated at the aggregate EM level and remained below 50 in over half of the countries in our sample . Price pressures still seem to be easing, albeit at a slower …
2nd January 2024
This report was first published on Tuesday 2 nd January, covering the official PMIs and Caixin manufacturing PMI. We added commentary on the Caixin services and composite PMIs on Thursday 4 th January. Rebound led by services and construction The official …
This page has been updated with additional analysis from the post-meeting press statement and press conference. CNB kicks off its easing cycle The Czech National Bank (CNB) maintained a hawkish tone as it started its easing cycle today, but we still think …
21st December 2023
The more supportive global risk environment is helping to ease some financial strains across the EM world, but there are still pockets of vulnerability heading into 2024. Balance of payments positions are fragile in Turkey and Tunisia. Public debt risks …
19th December 2023
At face value, the Argentine central bank’s (BCRA’s) decision yesterday to switch (and essentially lower) its policy rate seems at odds with the goal of tackling the country’s severe inflation problem. But the move appears to be aimed at shifting the …
Saudi Arabia looks set to record its worst economic performance this year, outside of the pandemic and the global financial crisis, in more than two decades on the back of lower oil output. The worst of the downturn now appears to have passed and we …
Turkey’s gross international reserves have hit a record high recently which, on the face of it, suggests that the policy U-turn since May has helped to diminish the country’s balance of payments vulnerabilities. But the central bank’s large on- and …
14th December 2023
The economic reform measures announced yesterday by Argentina’s Economy Minister Luis Caputo, including a large devaluation of the peso and fiscal tightening, mark a clear change in policymaking from the previous Peronist administration. But this wasn’t …
13th December 2023
The RBI kept the repo rate on hold at 6.50% today as expected and continued to strike a hawkish tone. Against a backdrop of robust economic growth and a renewed rise in food inflation, we doubt the central bank will loosen policy until the second half of …
8th December 2023
A stand-out feature of the emerging world in 2023 has been the extent to which economic cycles have diverged. Divergence is likely to be the name of the game in 2024 too. We think some countries which have performed surprisingly well this year (e.g. …
7th December 2023
Inflows into EM bond and equity markets have picked up over the past month, particularly in Turkey where optimism around the policy U-turn seems to be building. Capital flows into EMs may be bumpy in the very near term as global growth disappoints, but …
5th December 2023
The latest batch of state election results suggests that support for Prime Minister Modi’s BJP remains firmly intact and that it is clearly in the driving seat to secure another victory in next year’s general election. That reduces the risk of big fiscal …
4th December 2023
The emerging market manufacturing PMIs for November were a mixed bag – although most headline indices edged up, they remained below 50 in over half the countries that we track, largely due to weak external demand. But price pressures did ease across the …
1st December 2023
This page was first published on Thursday 30 th November, covering the official PMIs. We added commentary on the Caixin manufacturing PMI on Friday 1 st December , and the Caixin services and composite PMI on Tuesday 5 th December. Reality may not be as …
30th November 2023
The falls in the Egyptian pound over the past year have increased the size of commercial banks’ net FX assets, but what has flown under the radar is banks’ growing exposure to the government’s FX debt. So long as the authorities get the IMF deal back on …
29th November 2023
In much of the world, interest rates are likely to settle at higher levels than was the case prior to the pandemic. But China is a key exception, with its shrinking population, slowing productivity gains, low inflation rate and increasingly-heavy debt …
Following a temporary reversal in Q3, EM inflation has started to fall again in the last few months. While this is set to continue, we think it marks the start of a second phase in the EM disinflation process – one that will be characterised by a much …
27th November 2023
The South African Reserve Bank opted against responding to last month’s larger-than-expected rise in inflation with an interest rate hike, leaving the repo rate unchanged at 8.25% today. But officials continued to strike a hawkish tone and it looks like …
23rd November 2023
The Israeli government’s budget deficit is widening sharply and we think it will breach 5% of GDP next year. Provided the length of the war and the increase in the deficit are short-lived, we don’t think this will cause funding problems and the …
22nd November 2023
In our flagship report on the neutral interest rate (r*), we argued that r* in developed markets will rise and be higher than is widely assumed. (The full report can be accessed here .) For most EMs, r* is also likely to be higher (with China being a …
20th November 2023
The intensification of loadshedding has brought growth in South Africa’s economy to a halt this year, but there appears (finally) to be some light at the end of the tunnel. Repairs to existing power plants, independent power projects, and the …
Javier Milei’s victory in the final round of Argentina’s presidential election yesterday will bring about a major shift in economic policymaking. We suspect that some of his more radical proposals – namely dollarisation – may not materialise given limited …
With a lot of pessimism seemingly already priced in to China’s “risky” assets, we suspect a thawing in US/China relations could give them a boost. But we think their longer-term outlook is less rosy. Meanwhile, we don’t think US/China tensions will have …
17th November 2023
Sovereign debt risks across Frontier Markets have eased slightly since last quarter. But dollar-bond spreads in Ethiopia have jumped following its request for debt-service suspension earlier this week. And we think that the risk of default over the coming …
16th November 2023
The squeeze on Russia’s budget and current account positions has eased over the second half of this year, largely thanks to a rise in oil prices. Higher energy revenues next year should help to limit the impact of a surge in military spending on the …
15th November 2023
The latest Saudi GDP data paint a downbeat picture in which the recession has deepened amid oil output cuts. But the good news is that the recession looks to be coming to an end. And we think the economy will begin to recover over the coming quarters as …
We think that bonds in Emerging Markets (EMs) will struggle in the next couple of months. Further ahead, though, we expect their yields to fall, as both “risk-free” rates and spreads drop. The yields of EM local-currency and dollar-denominated bonds have …
Data over the weekend showed that Egypt’s inflation rate slowed, confirming that September marked the peak, and our baseline scenario is that it will continue to drop back as we head into 2024. The main risk to our view is that there is a disorderly …
13th November 2023
This page has been updated with additional analysis since first publication . In this Update , we present our sovereign debt heat map that provides a snapshot of debt risks across Sub-Saharan Africa. Government debt is still above pre-pandemic levels and …
10th November 2023
Flows out of EM bond and equity markets have eased since early October, but we think the recent dollar weakness which has helped to support capital flows into EMs is unlikely to continue. The good news is that current account deficits have narrowed in …
High carry EM currencies have rallied as US bond yields have fallen back and risk sentiment has improved, but we still expect most of these currencies to come under renewed pressure in the coming months. Since the peak in 2-year Treasury yields on 18th …
9th November 2023
Persistent balance of payments strains brought pressure on some of the region’s non-oil producing countries who employ fixed exchange rate regimes. FX reserves have been depleted to support currencies and, in some cases, these are insufficient to cover …
Higher profitability has helped to boost EM banks’ financial positions over the past year and reduced the tail of weak banks that might struggle to cope with rising loan losses on their balance sheets. The overall EM picture looks strong, but pockets of …
7th November 2023
Most EM manufacturing PMIs for October were weaker than expected, largely driven by sluggish domestic and external demand. This weakness has, at least, resulted in input and output price components dropping back, which supports our view that the EM easing …
2nd November 2023
This publication has been updated with additional analysis from the post-meeting press statement and press conference. CNB in ‘wait and see’ mode The Czech National Bank’s (CNB’s) decision to leave interest rates on hold again today, at 7.00%, was …
Brazil’s central bank (BCB) cut the Selic rate by 50bp, to 12.25%, at yesterday’s Copom meeting and signalled again that further similar reductions lie in store over the next few meetings. Even so, with strong wage growth set to keep inflation above …
