Filtered by Region: Emerging Markets Use setting Emerging Markets
The more cautious tone of the Monetary Policy Report released by Chile’s central bank today supports our view that, once the large falls in inflation are behind us in early 2024 and the economy recovers, the easing cycle is likely to shift down a gear. We …
6th September 2023
The Bank of Israel (BoI) left its policy rate on hold again today, at 4.75%, and while our baseline forecast is that the tightening cycle is now over, the BoI’s hawkish comments support our view that it won’t turn to interest rate cuts until Q2 next year …
4th September 2023
EM industry strengthens, but export demand weak The manufacturing PMIs for August pointed to pick-ups in activity in some of the major EMs. But external demand remains soft, which continues to weigh heavily on some of the more export-oriented economies in …
1st September 2023
Fixed investment has been the weak spot in Colombia’s strong post-pandemic recovery and it is likely to remain subdued over the next couple of years due to a combination of the fragile political backdrop, lower oil prices and weakness in the housing …
31st August 2023
Turkey’s policy shift has ticked a lot of the right boxes so far and the central bank’s large rate hike this month will go a long way to rebuilding confidence among investors. But there are still question marks about how much tightening will be delivered …
This page was first published on Thursday 31 st July, covering the official PMIs. We added commentary on the Caixin manufacturing PMI on Friday 1 st September , and Caixin Services and Composite PMIs on Tuesday 5 th September. Note: We discussed the China …
On the face of it, Morrocco’s public finances are starting to look alarming. The budget deficit has widened and the public debt-to-GDP ratio has jumped by over 10%-pts in less than three years. But a deeper dive suggests that there isn’t cause for …
30th August 2023
Equities in Europe, the Middle East and Africa (EMEA) have returned little in US$ terms so far this year. While they may fare better next year, we doubt they’ll outperform the wider emerging equity market. Equities in EMEA, although marginally ahead of …
29th August 2023
Despite the slowdown in EM GDP growth in Q2, there’s little sign that labour markets are softening. Wage growth remains alarmingly strong across much of Latin America and Central Europe (CEE). That supports our view that, while central banks in these …
Efforts by the BRICS group to demonstrate an image of unity and cooperation were on full show at this week’s summit, but – aside from membership expansion – policy proposals were light and not overly ambitious. And while there’s a broader question about …
25th August 2023
Market concerns about sovereign debt risks across frontier markets have eased a touch in recent months. For our part, while we think that Egypt and Nigeria should be able to avoid default, Kenya faces a more challenging path to do so. And in the cases of …
23rd August 2023
Equities in Latin America have generally returned more than those in the rest of the world so far this year for US dollar-based investors willing to shoulder the currency risk. We think that is set to change. The total return in US dollars from the MSCI …
22nd August 2023
China’s prominence as a creditor to African economies goes a long way to explaining the slower speed of debt restructuring negotiations in Zambia, in contrast to Ghana, following their respective defaults. Mozambique and Kenya are two other countries …
17th August 2023
The crises unfolding in Argentina, Russia, as well as in China’s property sector, this week may rumble on for some time. And in the case of China’s property downturn, there are likely to be spillovers to other EMs, particularly metals producers. But these …
15th August 2023
The decision by Russia’s central bank to increase its policy rate by 350bp, to 12.00%, at an unscheduled meeting today underscores the challenges that policymakers are now facing to maintain macroeconomic stability in an economy that is being distorted by …
Emerging economies whose currencies have fallen by 15% or more against the dollar in a single day – as the Argentine peso did yesterday – have fallen into recession in more than 80% of cases in the last 30 years. Sovereign debt defaults occurred after …
Oil output cuts fuelled Saudi Arabia’s economic downturn in the first half of 2023 and the drag from the oil sector appears to have intensified more recently. Taking together with signs that activity in the non-oil sector is cooling, the Kingdom’s …
14th August 2023
After a strong run since April, inflows into EM bond and equity markets have softened markedly in the past few weeks. Inflows into India, in particular, have weakened. Turkey continues to see sizeable foreign inflows, but these are only a fraction of the …
10th August 2023
The RBI kept the repo rate on hold at 6.50% today as expected and maintained a hawkish tone amid the recent surge in food prices. It’s unlikely that the rate hiking cycle will restart. But there is a significant risk of the easing cycle that we expect to …
Recent interest rate cuts in Brazil and Chile have fuelled talk of a broad-based EM easing cycle and we expect most EM central banks to start cutting rates in Q4 or Q1. We expect those with the highest policy rates (above 10%) to deliver 500bp or so of …
9th August 2023
Economies in Central and Eastern Europe (CEE) have experienced large and persistent net migration outflows in recent decades, but the tide has shifted in the past five years or so as outflows have dropped sharply. This is likely to continue, with net …
7th August 2023
The key points that stand out from the recent moves by central banks in Brazil, Chile and Hungary to cut interest rates are, first, how quickly policymakers have shifted from hawkish to dovish and, second, how they appear to be front-loading their …
3rd August 2023
We’ll be discussing Argentina’s upcoming PASO election and what it means for the economy in a 20-minute online Drop-In on Wednesday 9 th August at 10:00 EDT/15:00 BST. (Register here .) There are some unnerving similarities between Argentina’s current …
We think El Ni ño poses downside risks to the prices of emerging market assets, in general. But even if the effect in aggregate wasn’t all that large, there are several vulnerable sectors where such an event could create some relative winners and …
We have collated a range of low-profile activity data for the UAE that point to strong activity in the non-oil economy. But this won’t be enough to offset the impact of oil production cuts. Prospects for next year are better, though, and we think the UAE …
We estimate that China’s trend rate of growth has slowed from 5.0% in 2019 to 3.0% now, based on our China Activity Proxy. This is a steeper deceleration than in the years leading up to the emergence of COVID-19. The official GDP data, while not fully …
2nd August 2023
The fall in the EM manufacturing PMI to a six-month low in July was mainly driven by a renewed drop in China, but the surveys generally remained downbeat across most EMs last month. We think EM industry will continue to struggle over the rest of this year …
1st August 2023
Risks to EM food supply have increased amid the likelihood of an El Niño, the end to the Black Sea grain deal and India’s rice export ban. Countries in the Middle East and Africa are the most vulnerable to lower grain supplies and many EMs (particularly …
28th July 2023
Policymakers at the South African Reserve Bank are keen to emphasise that their work to tame the “inflation monster” is not over, leaving open the possibility of additional monetary tightening. The two most likely triggers would be, first, if loadshedding …
27th July 2023
The Israeli government’s decision to press ahead with its controversial judicial reforms won’t necessarily cause foreign investment into Israel to dry up, but the direction of policymaking threatens to push the economy onto a permanently lower growth …
25th July 2023
Investment held up well in the first half of the year but the recent moderation in credit growth and the messages from the latest survey data suggest that it is going to enter a softer patch over the coming few quarters. Unperturbed by the cumulative …
China is not suffering a balance sheet recession: most private firms are not highly indebted and would borrow if they had more confidence in the economic outlook. But there are other parallels with Japan’s circumstances in the 1990s that point to …
24th July 2023
While the Fed and the ECB are set to hike interest rates this week, subsiding inflation means that the upcoming EM central bank meetings will tilt towards monetary easing . And we expect that the EM rate cutting cycle will broaden out over the course of …
The end to the Black Sea grain deal has put Egypt’s vulnerability to rising global wheat prices back in the spotlight. Even if supply disruptions are avoided, higher wheat prices would add to strains in Egypt’s balance of payments, force the government to …
Mexico’s exports have fared well recently and the current account deficit remains small. But a closer look suggests that the strength of the peso is causing dynamics in the balance of payments to worsen. The Mexican peso has been one of the best …
20th July 2023
One way in which EMs may benefit from the fragmentation of the global economy into US- and China-aligned blocs is via “friend-shoring”. There appears to be evidence that the US is importing a higher share of goods from EMs, mainly Vietnam, Taiwan, Mexico, …
19th July 2023
The likelihood of an El Niño event in the second half of this year adds to upside risks to global inflation and downside risks to activity. For the advanced economies, higher prices of agricultural commodities could slow the decline in food inflation. But …
12th July 2023
Inflows into EM financial markets saw a further pick-up in the past month and are now at their highest level since late last year, driven by inflows into Turkey and India. Inflows to Turkey could be sustained if policymakers take further steps towards …
11th July 2023
A severe El Niño event could be the harbinger of weak monsoon rains in India. This wouldn’t have as big an economic impact as it would have had a couple of decades ago. But it would harm employment and energy production. What’s more, it would push up …
10th July 2023
Tanzania’s economic growth will remain sluggish by past standards over the next couple of years due to the effects of persistent drought and tight fiscal policy. But with policymaking shifting in a more business-friendly direction under President Hassan …
6th July 2023
The fading of China’s reopening rebound will weigh on recoveries in EMs like Thailand and Hong Kong whose tourism sectors depend heavily on Chinese visitors, but otherwise we think it presents relatively limited headwinds to the rest of the emerging …
Tunisia is struggling to get an IMF deal over the line and, unless President Saied’s government agrees in the near-future to allow the dinar to fall and to implement a large fiscal consolidation, the risk of a messy balance of payments crisis and …
Although we expect emerging market (EM) policy rates to fall vis-a-vis the US this year, we don’t expect EM local-currency sovereign bonds to outperform US Treasuries until global growth picks up over 2024. EM central banks have generally shifted into …
5th July 2023
A significant number of EMs that were running large current account deficits last year – including much of Central and Eastern Europe (CEE), Peru and Chile – have seen dramatic improvements in their external positions. That limits the downside risks to …
Activity in Saudi Arabia’s non-oil sector has continued to hold up well, but that is merely cushioning the blow to the economy from oil output cuts. The Kingdom’s economy contracted by 1.4% q/q on a seasonally-adjusted basis in Q1, which was driven by …
The widespread falls in the EM manufacturing PMIs for June suggest that industry continued to struggle in Q2 and we think further weakness lies in store. Taken together with the easing price pressures shown by the surveys, it looks like an EM monetary …
3rd July 2023
The sharp narrowing in India’s current account deficit in Q1 was largely due to the strength in services exports. Looking ahead, we think the deficit will narrow to 1.0% of GDP across 2023 as a result of softer domestic demand and as commodity prices …
28th June 2023
EMs will account for over half of global GDP within the next decade and almost 60% by 2050. India will become the world’s third-largest economy before 2030. More generally, EMs with rapid population growth, with potential to develop into manufacturing …
26th June 2023
The armed uprising by Yevgeny Prigozhin’s Wagner mercenary group against the Russian military over the weekend has dealt a heavy blow to President Putin and exposed cracks in the regime. There are a lot of unknowns about how things will play out at this …
