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A fresh allocation of IMF Special Drawing Rights (SDRs), if implemented, would provide a welcome boost to the depleted foreign exchange reserves of some distressed frontier economies. But an allocation wouldn’t address underlying dire debt dynamics, …
3rd March 2021
February’s manufacturing PMIs released across the emerging world were the proverbial mixed bag but, taken together, generally point towards solid EM industrial production growth in the next month or two. There are signs under the hood of supply …
1st March 2021
Despite the rise in EM bond yields over the past week, EM financial conditions remain very loose. Most central banks are likely to look through the accompanying sell-off in currencies (indeed, some may welcome weaker exchange rates). But these moves do …
26th February 2021
President Biden’s fiscal plan would support the US economy but the positive spillovers to emerging markets via trade are likely to be surprisingly limited. We doubt the Fed would move more quickly to reduce stimulus in response, and external financing …
25th February 2021
Israel’s rapid vaccination programme has allowed the government to set out plans to re-open the domestic economy in the coming weeks and may offer some lessons for other countries. The speed at which the restrictions will be lifted is the most striking …
19th February 2021
Taken alone, prolonged restrictions on international travel would do little to hinder the global recovery since overseas tourism is a small share of world GDP and some of the lost spending would be made up. But the aggregate masks a wide range of effects. …
18th February 2021
The latest rise in the price of oil – and our view that it will increase further this year – could push current account and budget balances into surplus in many of the EM producers. It should ease any concerns about dollar pegs in the Gulf, although we …
17th February 2021
We do not expect a re-run of the 2013 “taper tantrum”, in which EM assets went into a tailspin and some EM central banks were forced to hike policy rates. But even if there were a similar period of turmoil, the fallout for EMs would be less severe. The …
16th February 2021
The recovery in many emerging markets after the Global Financial Crisis was characterised by concerns about destabilising capital inflows, overheating, and asset price bubbles. This recovery is likely to be more gradual, external imbalances are unlikely …
12th February 2021
Net portfolio inflows into many emerging markets reached multi-year highs towards the end of 2020, which allowed a handful of central banks to lean against the wind and accumulate FX reserves. That said, early data suggest that net portfolio inflows have …
10th February 2021
The rise in global agricultural prices in recent months has sparked concerns about a surge in food inflation across the emerging world but we think that these fears are overdone. In any case, most central banks would probably look through higher food …
5th February 2021
The announcement of FX purchase programmes by several EM central banks has evoked comparisons with the “currency wars” that followed the Global Financial Crisis. One lesson from this period is that FX intervention is unlikely to prevent further currency …
4th February 2021
Manufacturing PMIs from emerging markets generally rose last month, underscoring that industrial sectors should continue to weather renewed outbreaks and restrictions in the coming months. But China’s manufacturing PMIs fell, providing further evidence …
1st February 2021
The main risks to the outlook for emerging markets this year relate to virus developments and vaccine rollout. (See here and here .) The more traditional macro risks are smaller, but one going under the radar in a few large EMs is that fiscal support …
21st January 2021
The speed at which vaccines can be rolled out will be a key determinant of economic performance this year, and this is likely to differ widely across EMs. This Update sets out a provisional framework for thinking about this process and when it will allow …
19th January 2021
High-frequency data show that the surge in net inflows to EM bond and equity markets seen last month is now easing, but inflows remain strong. We think that will remain the case as global risk appetite continues to improve. The data provide signs that the …
15th January 2021
In this Update , we take a look at the key elections that are scheduled across the emerging world over the coming year and outline their implications for economic policy and growth . Table 1 gives a summary of the major elections taking place across the …
13th January 2021
The risks to vaccination programmes fall into three groups: procurement, deployment, and effectiveness. In the coming few months, deployment issues will be a key limiting factor in most countries. These should be overcome relatively quickly in DMs, but …
8th January 2021
While the EM manufacturing PMI declined last month, largely reflecting a fall in China’s index, the overall message is that EM industry held up well at the end of last year. The sector is likely to fare well in 2021 provided that the rollout of vaccines …
4th January 2021
Net portfolio inflows into EMs have been close to multi-year highs this month, and that appears to have come alongside an uptick in sovereign Eurobond issuance in recent weeks. Even so, debt issuance hasn’t been abnormally large. And it has been skewed …
17th December 2020
Frontier economies will receive only a relatively small direct economic boost from the roll-out of vaccines next year. But the indirect benefits via higher commodity prices, capital inflows and tourism spending will be more substantial. These indirect …
15th December 2020
November’s headline manufacturing PMIs were generally encouraging and suggest that EM industrial sectors are faring well, even in Central & Eastern Europe where overall GDP will slump in Q4. We expect industrial sectors to continue to lead the EM recovery …
1st December 2020
The US election outcome and positive vaccine news has triggered a jump in EM net portfolio inflows to their highest level since 2014. These inflows are likely to remain robust over the coming quarters. Our total EM Capital Flows Tracker is constructed …
24th November 2020
Zambia became the first African government to default during the current crisis and debt risks are high in several other Frontier Markets, including Ghana and Kenya. The G20’s recently-announced ‘Common Framework’ to provide debt relief is a step in the …
23rd November 2020
Relatively few EMs have signed large-scale advance purchase arrangements with pharmaceutical companies and the roll-out of vaccines is, in large part, likely to be slower than in DMs. This Update answers five questions on vaccine distribution in EMs and …
18th November 2020
The distribution of an effective COVID-19 vaccine across the emerging world would clearly improve the near-term economic outlook significantly. Even so, some EMs, including India and parts of Latin America and Africa, would still suffer economic …
10th November 2020
The recent pressure on the Argentine peso and the Turkish lira has echoes of the currency crises both countries suffered in 2018. But there are also some important differences which mean that, even if Turkey and Argentina were to suffer outright currency …
3rd November 2020
India’s banks entered the crisis in worse shape than other major EMs, although large state involvement in the financial sector means the government is unlikely to remain idle if loan losses start to mount. Elsewhere, we have concerns in Brazil, Mexico, …
October’s headline manufacturing PMIs released so far for EMs were generally encouraging across the board, but they do not fully reflect the very latest surge in global COVID-19 cases and restrictions imposed across much of Europe. We think that these …
2nd November 2020
Whatever the outcome of the US election, we expect that the trends of US-China decoupling and deglobalisation will continue. The election result could be pivotal for some EMs: a Joe Biden victory could raise geopolitical tensions with Turkey and Russia. …
16th October 2020
Daily data suggest that foreign investors have been net sellers of emerging market bonds and equities in recent weeks, but there are reasons not to be very concerned. Our EM Capital Flows Trackers are constructed using monthly data on foreign exchange …
8th October 2020
September’s relatively strong batch of emerging market manufacturing PMIs suggests that recoveries in industrial production continued in September. But with the global rebound losing steam , growth in export-led EM industrial sectors is likely to slow in …
1st October 2020
EM financial conditions have tightened a little in recent weeks, although only in Turkey does this threaten to become a significant headwind to growth. Elsewhere, conditions remain very loose but the positive effect of this on activity will be dampened by …
29th September 2020
Most EMs in Latin America, Africa and South Asia that were battling worryingly large virus outbreaks appear to have passed the peak in recent weeks. That should allow a gradual scaling back of restrictions, supporting economic recoveries. Meanwhile, the …
A number of EMs – notably Brazil, Mexico and Korea – have experienced strong increases in food inflation in recent months, which have pushed up headline rates. But we think that food inflation in the worst-affected countries is close to a peak. Even if it …
24th September 2020
Our Tracker suggests that last month EMs suffered the largest net outflow of capital since the height of the market turmoil in March. Net outflows look set to persist in the coming months, although they should remain small compared to past standards, …
16th September 2020
China’s strong economic recovery is likely to provide more of a support to the recovery in (non-oil) commodity producers in Latin America and Africa than it will in the rest of Asia. But we don’t think that China’s growth will provide as much of a boost …
10th September 2020
The experience of the aftermath of the Global Financial Crisis (GFC) chimes with our EM rates view on two counts. The first is that easing cycles in many EMs are now at an end (Brazil) or will draw to a close over the coming months (Mexico, South Africa …
9th September 2020
The further rise in the EM manufacturing PMI to a nine-year high of 52.5 in August, from 51.4 in July, suggests that the EM recovery continued in the middle of Q3. But the rebound has been uneven across countries, with PMIs falling in countries recently …
1st September 2020
Emerging markets account for the majority of new global coronavirus cases each day (see Chart 1) and, while containment measures may be tightened sporadically, these are generally likely to be targeted and localised. The spread of the virus is, of course, …
21st August 2020
Concerns are mounting that Turkey is on the brink of a fresh currency crisis which, were it to materialise, could trigger some turbulence in other EMs’ financial markets. But it’s unlikely to result in stress in the rest of the emerging world on anywhere …
13th August 2020
A fundamental force behind the growing pressure on the Turkish lira is the economy’s widening current account deficit. But in most cases, the Covid-19 crisis appears to be causing current account deficits to narrow, which is one factor that should limit …
12th August 2020
The rise in the EM manufacturing PMI in July (to 51.4) should be treated with caution but, even so, it still suggests that conditions in EM manufacturing are improving. The recovery is likely to be fastest in China and Central & Eastern Europe. The …
3rd August 2020
The recovery in EM capital flows stalled last month, but this is only a minor setback – net outflows were very small. The main culprit appears to have been softer foreign demand for EM equities, with appetite for bonds continuing to strengthen. If we’re …
20th July 2020
Several EMs in Latin America, as well as South Africa, Nigeria, India and Turkey could use financial repression policies to deal with the legacy of higher public debt burdens resulting from the coronavirus crisis. This Update explains what form these …
9th July 2020
A combination of timely policy support and resilient cross-border banking sector flows appeared to alleviate a collapse in EM credit growth during height of the coronavirus crisis. These forces should continue to buoy credit growth in the coming months, …
8th July 2020
A rebound in fuel inflation will push up headline inflation in most EMs over the coming months, even as food and core price pressures moderate. Alongside the recovery in activity, this means that the broad-based EM monetary easing cycle is approaching its …
2nd July 2020
The strong rise in the EM manufacturing PMI from 45.4 in May to 49.6 in June suggests that EM manufacturing is firmly on the road to recovery. We think that the rebound in activity will probably be fastest in China and Emerging Europe. The headline EM …
1st July 2020
Governments in Brazil and South Africa have outlined plans for large multi-year fiscal squeezes from 2021, which will hold back their economic recoveries and are likely to be politically untenable over a sustained length of time. While a few other …
30th June 2020
Having suffered sizeable net capital outflows in March and April, our Tracker suggests that capital flows into and out of the emerging world were essentially balanced last month. And daily data suggest that EMs may have attracted net capital inflows this …
25th June 2020