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October’s PMIs suggest that manufacturing sectors in Southeast Asia are recovering from recent Covid waves, but supply constraints are taking their toll on industry in China, Brazil and parts of Emerging Europe. With supply shortages set to persist for …
2nd November 2021
A big chunk of the recent rise in headline inflation in EMs has been driven by a jump in energy inflation which will be transitory. But core inflation has also risen in parts of Latin America and Emerging Europe and is likely to prove more persistent. …
22nd October 2021
The supply constraints that have hit global vehicle output have probably reduced the level of GDP by a modest 0.1-0.2% in most EM auto producers, but some countries like Czechia, Hungary and Mexico have suffered much bigger blows. And the drag from …
15th October 2021
Net capital inflows into EMs appear to have dropped over the past few weeks as investors have turned more risk averse. Looking ahead, a further rise in US Treasury yields could lead to larger outflows from EMs over the coming months. The good news is that …
13th October 2021
Irrespective of how the current problems in China’s property sector are resolved, property construction there is entering a period of structural decline. Among other EMs, the main effects will be felt in metals producers in Latin America and Africa, …
7th October 2021
A likely flood of exports from India and China, as well as a ramping up of donations from the US, should help to significantly boost vaccine supply for the many poor EMs in Africa and South and South East Asia whose vaccine rollouts lag behind. That said, …
6th October 2021
Although the emerging market manufacturing PMI ticked up last month, EM industry has been undergoing a slowdown for some time. And the surveys show that supply constraints are mounting, which is likely to weigh on manufacturers’ output in the months …
1st October 2021
Several EM central banks have raised interest rates in the past couple of months on the back of growing inflation concerns (including many in Latin America) and/or strong economic recoveries (parts of Central Europe, Korea). Hiking cycles look set to …
23rd September 2021
If, contrary to our opinion and the consensus, a collapse of Evergrande ends up having a significant impact on the rest of the world, it will be because it first causes either major financial dislocation within China or a property-led slump in China’s …
22nd September 2021
Net capital outflows from emerging markets appear to have eased over the past month, helped by a pickup in portfolio flows into South East Asia and India. Looking ahead, even if rising US Treasury yields were to trigger renewed outflows in the coming …
15th September 2021
Our financial conditions indices show that conditions remain loose by historic standards in most EMs. The key exception is Latin America, where conditions have tightened sharply this year due to rising interest rates and fiscal risks. This could pose a …
13th September 2021
With external positions in decent shape in most major EMs, the macroeconomic fallout from any tightening of external financing conditions should be limited. But there are a handful of EMs which look vulnerable. Turkey remains the key one, but risks are …
2nd September 2021
The EM manufacturing PMIs for August suggest that virus disruptions and supply chain constraints held back output in much of Emerging Asia. Manufacturing slowed in most other EMs too, although there were at least early signs in Emerging Europe that …
1st September 2021
Net capital out flows from major emerging markets have picked up sharply over the past couple of weeks, driven by virus concerns, growing expectations that the Fed will begin tapering asset purchases this year as well as falls in commodity prices. But …
20th August 2021
Five years ago this October, we published a piece arguing that the “golden age” for emerging markets had ended and that they were entering a period of permanently weaker growth. Since then, many of the structural problems that we anticipated have begun to …
18th August 2021
The rapid spread of the Delta variant of the coronavirus adds to reasons to think that lacklustre economic recoveries lie in store for tourism-dependent economies in Africa, parts of the Middle East and South-East Asia. The weakness of tourism also …
4th August 2021
The $650bn allocation of IMF Special Drawing Rights (SDRs) that was finally signed off by the IMF yesterday should provide welcome relief to some frontier markets such as Ghana and Kenya that still face very high foreign borrowing costs. But it won’t …
3rd August 2021
June’s PMIs show that virus outbreaks have weighed on manufacturing in Southeast Asia while supply bottlenecks and weaker demand created headwinds for industry in China. In contrast, Indian industry rebounded sharply and manufacturing recoveries continue …
2nd August 2021
The spread of the Delta variant of COVID-19 poses a much bigger risk to economic recoveries in emerging markets than in developed markets. India, South Africa, and South East Asia have suffered already or are suffering. And limited vaccine coverage in …
20th July 2021
Net capital outflows from emerging markets have picked up over the past month following the Fed’s more hawkish turn at the FOMC meeting in early June. Outflows may intensify over the coming months, but the macroeconomic fallout in the major EMs should be …
14th July 2021
Budget deficits have narrowed from their 2020 peaks across the emerging world. The improvements in Brazil and Argentina – where deficits appear to be narrower than their pre-pandemic levels – provide welcome relief given both countries’ debt troubles, but …
8th July 2021
With the (usual) exception of Turkey, the strong rates of credit growth seen in some EMs including Brazil and Korea are unlikely to be sustained as policymakers have already started (or will soon turn to) tightening policy. The bigger concern is the …
6th July 2021
The PMIs for June show that manufacturing strengthened in most of Emerging Europe, but virus outbreaks, supply chain disruptions and a softening of demand created headwinds for industry in Asia. One common theme is that supply shortages persist, which is …
1st July 2021
The next EM central banks likely to raise interest rates are those whose economic recoveries are relatively advanced and can focus on inflation and/or financial risks. Chile and Korea fit into this group and we expect rate hikes from both in August. …
28th June 2021
For EMs, vaccine supply appears to be by far the biggest constraint on immunisation campaigns; vaccine hesitancy will probably rear its head at a much more advanced stage of rollout in most countries. And even then, governments seem to be having some …
23rd June 2021
By September, China could be in a position to export 340mn vaccines doses each month – more than most regions of the world have administered in total so far. China’s vaccines are less effective than others, but have been found to suppress outbreaks where …
17th June 2021
The broad-based rise in inflation across EMs this year has elicited varying degrees of policy responses from central banks. Those facing above-target inflation and most worried about credibility (Brazil, Russia) have already started hiking rates and will …
16th June 2021
Net capital outflows from emerging markets have eased over the past few weeks and Turkey and India (which suffered large outflows in April and May) have started to see renewed in flows. Even if outflows pick up again, the fallout in the major emerging …
9th June 2021
Supply-related price pressures are building, particularly in Central Europe and parts of East Asia. And while the factors behind this should prove temporary, output gaps in the most-affected countries are also set to close more quickly than in other EMs. …
Emerging markets as a whole will increase their share of global GDP over the coming decades, with the largest expansions likely to come in EMs with rapid population growth (sub-Saharan Africa), those with manufacturing sectors that can drive productivity …
3rd June 2021
Markit’s aggregate emerging market manufacturing PMI dropped back in May as new virus waves took a toll on some countries, notably India, although they suggest that the manufacturing recovery in Central and Eastern Europe (CEE) continued strongly. …
1st June 2021
Remittances into EMs were surprisingly resilient last year and should continue to hold up over the coming quarters. The outlook is strongest in Mexico and parts of South East Asia, due to the recovery prospects for the US economy. In contrast, the risk of …
25th May 2021
The rise in global agricultural prices in recent months has sparked concerns about a surge in EM food inflation. While it would be remiss to dismiss these, we think the impact may not be as severe as feared because, crucially, domestic conditions tend to …
19th May 2021
The major oil producers have seen the biggest gains in exports from the rally in commodity prices this year, although most of this windfall is likely to be saved which will limit the boost to economic recoveries. We expect that commodity prices will fall …
14th May 2021
High-frequency data suggest that outflows from India’s bond and equity markets have picked up in recent weeks as the country’s COVID-19 outbreak has worsened. At an aggregate level, though, outflows from EMs were moderate at the start of this month and, …
12th May 2021
While the high numbers of COVID-19 cases will drag on the recovery in many in EMs in Q2, there are – at least outside India – encouraging signs that the worst of the current waves may be over in most places. But so long as vaccine coverage remains low, …
6th May 2021
The impact of India’s COVID-19 crisis on other EMs through normal economic channels such as trade and financial links should be manageable. The more serious impact will come through delays to vaccine rollouts, particularly for countries in South Asia and …
5th May 2021
Markit’s EM PMI rose to a four-month high in April, but manufacturing sectors are likely to enter a softer patch in places facing large virus outbreaks. Meanwhile, supply chain disruptions are causing price pressures to build in parts of Asia and Central …
4th May 2021
With the notable exception of Turkey, the net capital outflows from emerging markets seen in February and March appear to have eased in recent weeks. Outflows may yet intensify over the coming quarters amid the backdrop of rising US Treasury yields, but …
15th April 2021
Virus outbreaks have taken a sharp turn for the worse across several large EMs – including India and much of Latin America – and look likely to hold back economic recoveries in Q2. The recent experience of Chile suggests that it will be a long slog for …
14th April 2021
The mooted $650bn allocation of IMF Special Drawing Rights (SDRs) that looks close to being signed off would provide welcome relief to some smaller frontier markets such as Ghana and Kenya that still face very high foreign borrowing costs. But it won’t …
7th April 2021
Markit’s EM manufacturing PMI dipped last month, but the survey still paints a pretty positive picture of the sector’s recovery across the emerging world – with Brazil a notable outlier. In the meantime, supply chain disruptions are causing price …
1st April 2021
The rapid re-opening of Israel’s economy since February has triggered a rebound in activity that looks stronger than had been widely anticipated. In particular, the recovery in hospitality and leisure spending has been faster than that which followed …
31st March 2021
Particularly weak recoveries lie in store for tourism-dependent emerging markets, including much of Africa, parts of the Middle East (e.g. Jordan), and South East Asia (e.g. Cambodia). A lacklustre rebound in tourism could add to balance of payments …
29th March 2021
The raft of EM central bank decisions over the last couple of weeks suggests that the door has largely closed on further rate cuts and that the balance will shift (slightly) towards hikes over the coming months. But this has more to do with domestic …
26th March 2021
The latest crisis engulfing Turkey will make it harder for the country to roll over its external debts, with the banking sector particularly vulnerable. If Turkey’s crisis worsens, it may cause wobbles in a few EM currencies, but there are reasons to …
22nd March 2021
The recent rise in EM sovereign bond yields will, if sustained, make public debt problems in some countries even worse. Those with large local currency debts may ultimately turn to financial repression policies, which might improve debt dynamics but at …
18th March 2021
Portfolio outflows from several EMs have intensified over recent weeks as fears over a re-run of the “Taper Tantrum” appear to be playing on investors’ minds. But outflows are currently much smaller than they were in 2013 and, even if there were a …
15th March 2021
Recent currency falls and rises in inflation have all but guaranteed interest rate hikes in Turkey and Brazil next week, and Russia’s central bank is likely to lay the groundwork for tightening too. More broadly however, low inflation and still-large …
11th March 2021
The rise in US Treasury yields poses a risk for those EMs with large external financing needs such as Turkey as well as some smaller frontier markets, and could force central banks in these countries to tighten monetary policy. The accompanying rise in EM …
10th March 2021