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Policymakers in the likes of India, much of Latin America and parts of Africa are easing lockdowns even though the coronavirus is still spreading rapidly. This may be less economically damaging than keeping stringent restrictions in place for longer, but …
11th June 2020
Recently released government budget data for April suggest that fiscal deficits in many EMs, including in Brazil, Mexico, India and Turkey, may be running at 10-20% of GDP. This won’t cause a spate of acute fiscal crises, but it is yet another reason to …
10th June 2020
Financial conditions have eased substantially across major EMs over the past few months, but we doubt that this fading headwind will turn into a major tailwind for activity in the coming quarters. Financial conditions gauge the state of financial markets …
9th June 2020
The steepening of EM local currency government bond yield curves since the crisis began in mid-February largely reflects a fall in short-term rates, but in some cases, like Brazil, Mexico and South Africa, it also reflects persistently high long-term …
4th June 2020
While we would interpret the May PMIs with caution, the small rise in the EM manufacturing PMI last month tallies with high-frequency indicators and suggests that EM activity is probably past the worst. The increase in the EM manufacturing PMI to 45.4 in …
1st June 2020
Large parts of Emerging Asia have controlled the virus exceptionally well, which should allow activity to recover quicker than in most other EMs. In contrast, many countries in Latin America are still struggling to contain their outbreaks. With lockdowns …
26th May 2020
Our Tracker suggests that net capital outflows from EMs eased markedly last month. And daily data suggest that outflows have remained relatively modest so far in May. One country which is still experiencing major stress, however, is Turkey. With the …
20th May 2020
Recent reports suggest that governments of some low-income countries are reluctant to restructure debts owed to private creditors for fear of losing market access and pushing up future borrowing costs. But history suggest that the “defaulters’ premium” on …
18th May 2020
The broad-based decline in inflation across the emerging world since the pandemic struck has been driven in part by a dip in fuel inflation, but core inflation is softening in many countries too. We expect inflation to fall further, which should embolden …
13th May 2020
With the incoming economic data likely to be less reliable than usual, we think that investors should focus more on the timely low-level activity data and the changing shape of infection curves to judge which EMs sit where in the crisis. Meanwhile, …
11th May 2020
The drop in the EM manufacturing PMI to 42.7 in April confirms that industry is collapsing in Q2. Even though industry will bounce back in the EMs starting to ease lockdown measures, the weakness of global demand means that any recovery will be very …
4th May 2020
In those EMs that were quick to control their coronavirus outbreaks (South Africa, Poland, Vietnam), lockdowns are being eased which will allow activity to gradually recover. But the damage from social distancing will last for longer in EMs which were …
While we expect to see a sharp rebound in global activity once coronavirus-related restrictions are eased, GDP in most economies will still be below its pre-crisis path even after two or three years. (See here .) In this Update , we discuss which …
29th April 2020
Remittances held up well during the Global Financial Crisis but the scale (and type) of job losses in the current crisis mean that they are likely to fall sharply in the coming months. A drop in remittances would dampen economic recoveries in the likes of …
24th April 2020
Saudi Arabia and the other Gulf countries should be able to weather the collapse in oil prices without abandoning dollar pegs, and Russia will still run looser fiscal policy this year than last. But the rout will cause major strains elsewhere. A debt …
22nd April 2020
While emerging markets suffered large net portfolio investment outflows in March, the very latest data suggest that the pace of outflows eased in the first half of April. Meanwhile, it appears that other forms of capital flows – notably FDI and banking …
21st April 2020
The agreement by the G20 to allow the world’s poorest nations to suspend bilateral debt servicing will help to ease short-term balance of payments strains in much of Africa, most notably Angola, but many countries will still need comprehensive debt …
17th April 2020
Lockdowns have proved successful at limiting the spread of coronavirus in the likes of China, Korea and the Czech Republic, but they are likely to be less effective in poorer countries – notably much of Africa, India and Bangladesh – where households are …
15th April 2020
Non-performing loans are likely to climb in many EMs as output and incomes collapse, potentially forcing policymakers in some countries to step in and recapitalise banks. The risks are greatest in Brazil, Mexico and India, where policymakers’ reluctance …
9th April 2020
We think that most EM governments will increase the size of their fiscal support packages, which will cause public debt ratios to jump. For many of the poorest EMs, this will be supported by concessional financing and/or offset by debt relief. Among the …
Many EMs are now turning to the IMF for help in dealing with the fallout from coronavirus, raising questions about whether the Fund will be able to cope with the increased in demands on its purse. While the Fund should have enough resources to bail out …
2nd April 2020
The rebound in the EM manufacturing PMI in March offers little comfort as the survey masks the true weakness of industry. What’s more, the services sector may fare worse during this downturn. The rebound in the EM manufacturing PMI to 49.1 last month, …
1st April 2020
EM central banks have acted swiftly in response to the coronavirus crisis, including adding bond purchases to their toolkit. These are aimed primarily at reducing credit spreads and stabilising the financial system rather than a QE-style loosening of …
In the face of rapid capital outflows, EMs may turn to capital controls to stabilise balance of payments positions. Such measures might help to stave off crises in some countries (particularly if they come alongside external support), but strains in the …
31st March 2020
The impact of global measures to contain the coronavirus will result in a steep fall in EM GDP this year. And the collapse in output, spike in capital outflows and plunge in commodity prices could trigger balance sheet problems that make the downturn much …
30th March 2020
The dislocation in global financial markets has led to large capital outflows from EM debt and equity markets, which has caused financial conditions to tighten. And the economic effects could be much more damaging if major banks start to cut back exposure …
24th March 2020
A record number of sovereign dollar bonds are now trading at distressed levels, although these are mostly those of smaller EM governments. Among the most highly distressed sovereigns, Zambia and Ecuador are most likely to default in the very near term. …
The proliferation of measures to curb the spread of the coronavirus as well as shifts in consumer behaviour will have a severe effect on retail, accommodation, recreation and transport sectors across the emerging world. Mexico and parts of East Asia are …
19th March 2020
Governments in the developed world are unveiling major fiscal and monetary policy responses to try to stave off a financial crisis, and some EMs (notably parts of Emerging Europe and Emerging Asia) have the scope to ramp up their efforts too. That said, …
Extremely dense populations in urban areas, poor healthcare provision, and limited ability to impose quarantine measures mean that countries in South and South-East Asia, as well as Egypt and Nigeria, look highly exposed to a large-scale coronavirus …
18th March 2020
The broad-based tightening in EM financial conditions in recent days has been similar in scale to the onset of the global financial crisis. Conditions are now particularly restrictive outside of the BRIC economies, and is another reason to expect that …
16th March 2020
The recent oil price shock has invoked comparisons with 2014-16, when prices fell to similarly low levels and large EMs – notably Brazil and Russia – entered crises. But this time around, we think that crisis risks are limited to the smaller EMs, and …
11th March 2020
If the recent tightening of external financing conditions is sustained, it would result in severe balance of payments strains for the usual suspects (Turkey and Argentina), but also some of the smaller EM oil producers such as Angola, Bahrain and Oman. …
The sharp drop in oil prices won’t cause major economic strains in Saudi Arabia or Russia, suggesting that they will raise output and oil prices will remain low over the course of this year. But external positions in other oil producers (Angola, Colombia …
9th March 2020
The continued spread of the coronavirus and the Fed’s emergency rate cut will result in more aggressive loosening in EMs than we previously envisaged. We expect central banks in much of Emerging Asia to continue cutting interest rates, and have now …
4th March 2020
In light of the accelerating spread of the coronavirus – and the economic disruption that is likely to follow – we are pulling down our GDP growth forecasts for Q1 and Q2 of this year. Growth is likely to rebound over the second half of the year, but most …
2nd March 2020
The collapse in the EM manufacturing PMI to an 11-year low in February all but confirms that EM growth has fallen to its weakest rate since the global financial crisis. But the survey is yet to fully capture the disruption from coronavirus on EMs outside …
We estimate that the coronavirus-related sell-off in EM currencies will push up inflation over the next year by 0.6-0.7%-pts in Russia, Turkey and South Africa, reinforcing our view that easing cycles in these countries are close to an end. For most other …
25th February 2020
The outbreak of the coronavirus appear to have caused a pull back of net capital inflows to EM bond and equity markets on a similar scale to that seen during flare-ups in the US-China trade war last year. But the most recent figures suggest that inflows …
14th February 2020
The economic disruption from the coronavirus outbreak will lead to further rate cuts in much of Emerging Asia. And in those countries where currencies have fallen sharply, the moves have not been big enough to worry policymakers. As thing stand then, this …
11th February 2020
The coronavirus outbreak will result in much weaker growth in China in Q1 and has hit tourism sectors elsewhere. If factory closures in China are prolonged, the epidemic could start to cause more severe economic damage to the rest of the emerging world, …
4th February 2020
The January batch of EM manufacturing PMIs generally held up well, but the surveys are yet to capture the economic damage from the coronavirus outbreak. Extended factory closures in China are likely to disrupt EM industry this quarter, particularly in …
3rd February 2020
Chinese international tourist spending has surged over the past decade, which is one reason to think that the economic spillovers will be greater for the coronavirus than they were for SARS. But outside of Asia (and Mauritius), Chinese tourist spending is …
We expect that the broad-based EM easing cycle has further to run in the coming months but, as growth and inflation in many countries rise, it will be less widespread than in 2019. More importantly, we think that there will be some dovish surprises …
23rd January 2020
We estimate that net capital outflows from Emerging Markets fell to a six-month low in December, and they probably declined further at the start of this year. With global growth close to bottoming out and the Phase One US-China trade deal now agreed, …
The deal signed yesterday between the US and China was broadly as expected and has not led us to change our economic forecasts. The apparent ceasefire in the battle over tariffs removes a downside risk to growth. But tariffs remain high and we suspect …
16th January 2020
This decade is likely to be marked by slower growth and softer inflation in emerging markets. One consequence is that interest rates will probably be lower than most currently anticipate. A broad-based monetary easing cycle has been underway in emerging …
13th January 2020
Our measure of aggregate EM inflation, which hit a four and a half year high last month, should fall over the course of this year as the disruption caused by African Swine Fever fades. But this is largely a China story. For most EMs, higher oil prices and …
9th January 2020
The PMIs for December suggest that EM manufacturers, barring those in Latin America, ended 2019 on a firmer footing. Nonetheless, the external backdrop will remain challenging in 2020. The EM manufacturing PMI held steady at 51.0 in December for the …
2nd January 2020
On a net basis, capital continued to flow out of Emerging Markets (EMs) last month, and we think that 2020 will be the seventh consecutive year of outflows. Capital flows play a major role in EMs, as they finance spending and affect financial market …
11th December 2019