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The manufacturing PMIs for May suggest that EM industry has, in aggregate, strengthened in Q2. Nonetheless, with the surveys pointing to further weakness in key DM trading partners, EM industry is likely to struggle in the second half of this year. The …
1st June 2023
Recent gains in the US stock market have been unusually narrow, and we don’t think the conditions are yet in place for a broad-based rally. A striking fact about the recent gains in US equities is that they have been driven by a remarkably small number of …
31st May 2023
Financial risks across the major EMs look relatively well contained for the time being but there are some areas of weakness. Most immediately, following President Erdogan’s election victory the prospect of continued unorthodox policymaking in Turkey …
The results of elections in major EMs over the past month have increased macroeconomic policy risks. Most notably in Turkey , President Erdogan now has the edge ahead of a second-round presidential election run-off next week. Hopes of an opposition …
25th May 2023
EM labour markets have shown relatively little sign of adjustment in response to the recent weakening of growth. That’s likely to keep wage growth uncomfortably strong in Central Europe and Latin America. In turn, we think this will limit the scale of …
24th May 2023
Over the past couple of weeks we have held a series of roundtable discussions with clients across Asia and North America on the outlook for EMs. In this Update we provide our thoughts on the recurring questions that we received, including on China’s …
19th 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
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
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 …
10th 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 …
Click here to read the full report. We think the economic recovery in China will support further gains in the country’s equity market. Despite some renewed evidence that China’s economy has been recovering more strongly than most anticipated in the first …
3rd 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
EM central banks have, in general, remained in hawkish mood over recent weeks. Tightening cycles have continued in Mexico, Colombia and South Africa in response to high inflation, while policymakers in Egypt and Pakistan among others have raised …
24th April 2023
The economic impact of the Oxford malaria vaccine, which has now been approved by regulators in Ghana and Nigeria, will depend on the pace and breadth of the rollout and how long immunity lasts for. But it could potentially have a large positive impact on …
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
Table of Key Forecasts Overview – Aggregate EM GDP growth will be much stronger this year than last, but that’s almost entirely a result of China’s reopening rebound. Growth in most other EMs will be weaker and will generally disappoint consensus …
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
In the wake of the surprise move by OPEC+ to cut oil production, we held a special online briefing about the decision’s economic and market implications – as well as what this signals about global politics. Economists from across our Macro and Commodities …
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
EM Drop-In (6th Apr.): Our latest EM online briefing is all about the risks around the recent bank turmoil, including potential economic spill-overs and the state of EM bank balance sheets. Register now . Spill-overs to EMs from the turmoil in the global …
29th March 2023
Recent turmoil in the banking sector may have been a US and European story, but there are potentially important angles for Emerging Market investors. Our latest EM Drop-In explored the economic spill-over risks from the recent panic and the …
28th March 2023
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
While the Credit Suisse rescue might draw a line under that particular institution’s problems, it is clear that confidence in the financial sector overall is still extremely fragile. So regardless of whether more financial institutions run into trouble, …
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
Financial risks across the emerging world have eased since the start of the year but, with the Fed’s Jerome Powell all but confirming a higher peak for US rates, there is still scope for EMs with weak balance sheets to get punished. Although current …
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
Labour markets look very tight in Central Europe and a handful of other EMs (particularly in Latin America), and we think that wage growth is unlikely to fall far enough in these countries to bring inflation back to target in the near future. One …
2nd 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 …
1st March 2023
We think even if some of the recent headwinds that have buffeted emerging market (EM) assets fade, a slowdown in global growth might keep them under pressure in the near term. EM assets have had a fairly tough month . Local-currency and …
28th February 2023
The war in Ukraine, which marks its one year anniversary on Friday, has had a profound impact on the emerging world. Ukraine’s economy has collapsed, while Russia’s has contracted too even though the imposition of sanctions has not been as severe as …
22nd 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 …
21st 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 …
20th 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
Investors’ concerns about sovereign debt risks in frontier markets have eased a touch recently but several countries, particularly Tunisia and Pakistan, remain on the path to default. The latest (and last-minute) demands from China in debt talks with …
7th February 2023
We’ve received a lot of questions recently about the impact of China’s re-opening on EMs, including at our monthly Drop-in today. This Update answers three key questions on the winners and losers, the inflationary impact and the outlook for EM financial …
2nd February 2023
EM banks will face an increase in loan losses this year, but the good news is that banking sectors on the whole appear well-placed to absorb these, particularly in parts of Latin America, Emerging Europe and the MENA where capital buffers are high. That …
The manufacturing PMIs picked up in most emerging markets in January, offering hope that the worst for EM industry may have now passed. But activity remains soft against the backdrop of high interest rates and weak global external demand. The aggregate …
1st February 2023
We think the rapid economic recovery in China will lead to further gains in equities in China and other emerging markets (EM) this year. Despite some recent weakness, equities in China have rallied since the end of October, as a shift toward living with …
31st January 2023
Consumer spending in emerging markets initially recovered quickly from the pandemic, but it looks like high interest rates and inflation caused spending growth to slow sharply over the second half of last year. And we think consumer spending is likely to …
27th January 2023
China’s re-opening will have a significant impact on the rest of the emerging world by lifting commodity prices. That will improve the terms of trade of EM commodity producers, particularly Chile, Peru and the Gulf economies. However, we think that this …
25th January 2023
The outlook for emerging markets is looking better than it did just a few weeks ago. Most obviously, China’s shift to living with COVID means that its economy will rebound far sooner than we had previously thought. That will provide a lift to countries …
24th January 2023
It looks highly likely that Tunisia’s government will this year follow in the footsteps of Sri Lanka and Ghana by defaulting on its external debts. Fortunately, public debt risks elsewhere don’t look as acute. But while the focus is on sovereign …
17th January 2023
Foreign capital inflows into EMs have picked up a little since the beginning of the year. This should provide some relief to those countries with sizeable current account deficits, including Chile, Colombia, Philippines, and several countries in Central …
11th January 2023
