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Concerns about foreign currency debts in emerging markets have flared up again in recent weeks, but we think that the worst of these fears are probably overdone. FX debt burdens in most EMs have fallen as a share of GDP in recent years and balance sheet …
3rd December 2019
The November manufacturing PMIs point to diverging prospects for EM manufacturers at a regional level, with conditions improving in most of Emerging Asia but deteriorating in Emerging Europe. The EM manufacturing PMI stayed at 51.0 in November for the …
2nd December 2019
We estimate that net capital outflows from emerging markets (EMs) eased in October, and more timely data point to a further improvement so far this month. But we doubt that, on a net basis, capital will flow in to EMs anytime soon. Capital flows play a …
20th November 2019
A new wave of structural reforms, if implemented, could plausibly lift average EM GDP growth by over 1%-pt in the 2020s. But we doubt that these reforms will be forthcoming. Even if they are, EM GDP growth would still be much weaker than the 6% average …
14th November 2019
We expect most major EMs to loosen fiscal policy further next year. Weak public finances mean that a few major EMs, notably Brazil and South Africa, will need to tighten policy. But aside from Argentina, the risk of messy sovereign debt crises is …
7th November 2019
More EMs’ income levels have fallen relative to the US’s than have risen this year, the first time this has happened since the 1990s. This is likely to be a sign of things to come in the 2020s. There are lots of ways of defining catch-up growth, but our …
6th November 2019
The EM manufacturing PMI stabilised in October and the breakdown provides further evidence that the downturn in EM export growth may have bottomed out. That said, any recovery is likely to be slow going. Having risen to a six-month high in September, the …
4th November 2019
While protests have spread across several EMs, most notably Hong Kong, parts of Latin America and Lebanon, there is no mechanical link between unrest and economic growth and asset prices. As it happens, large protests in emerging markets are comparatively …
25th October 2019
Governments that have been elected during episodes of severe market stress and have managed to turn things around have done so by securing some form of bailout package and announcing a credible reform plan. But they have also usually benefitted from …
23rd October 2019
After small net inflows in Q2, we estimate that emerging markets (EMs) experienced net outflows in Q3. With the recent detente in the trade war unlikely to continue, further capital outflows are likely in the coming quarters. Capital flows play a major …
If faced with a steep downturn, most EM central banks would be able to cut interest rates substantially in order to cushion their economies. Interest rates in a handful of countries are close to the zero bound, but these are typically economies with …
4th October 2019
Aggregate emerging market growth is likely to stabilise at close to 4% y/y in the coming quarters, but within this several different economic cycles are playing out. The recent resilience in Central Europe and, importantly, China, is unlikely to last. But …
3rd October 2019
The rise in the EM manufacturing PMI to a six-month high in September adds to our view that EM growth is stabilising, even as advanced economies continue to lose momentum. The EM manufacturing PMI rose from 50.4 in August to 51.0 in September. While it …
1st October 2019
Rising tensions in the Middle East present a significant upside risk to our oil price and inflation forecasts, and could force a handful of EM central banks to abandon easing cycles or even hike interest rates. But a majority of central banks would …
26th September 2019
EM capital outflows persisted last month and, with the US-China trade war unlikely to abate, we think that they will continue in the coming quarters. However, the scale of outflows should remain modest, which in turn should limit the macroeconomic …
25th September 2019
Capital controls can be an effective tool if policymakers are able to plug loopholes and address the underlying economic vulnerabilities that initially resulted in pressures on the financial account. But this looks unlikely in EMs such as Argentina and …
12th September 2019
We expect EM currencies to come under further pressure over the coming quarters, but the falls are unlikely to be on the same scale as the ones which ended previous easing cycles. As a result, most EM central banks are likely to cut interest rates further …
5th September 2019
The rise in the EM manufacturing PMI for August is further evidence that the slowdown in EM GDP growth has bottomed out. But the surveys remain consistent with sluggish growth, and we continue to expect most EM central banks to loosen policy over the …
3rd September 2019
After a relatively calm first half of 2019, EM capital outflows probably picked up significantly in August as US-China trade tensions escalated. And outflows are likely to remain larger over the second half of the year, putting EM currencies under …
21st August 2019
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 85% of cases in the last 25 years. Sovereign debt defaults occurred after roughly half …
13th August 2019
The falls in EM currencies today suggest that the South African rand, Turkish lira and many of those in Latin America will remain in the firing line if, as we think likely, concerns about Argentina’s debt continue to build. So far at least, there’s little …
12th August 2019
The latest phase of the trade war is likely to have a relatively limited direct impact on EM exports. But with the US and Chinese policymakers upping the ante, the indirect effects via a hit to confidence, tighter financial conditions and weaker …
6th August 2019
The falls in EM currencies in this latest leg of the trade war have been large compared with previous episodes. If this turbulence continues, a few EM central banks (e.g. in Indonesia and Mexico) would probably postpone interest rate cuts and one or two …
5th August 2019
The manufacturing PMIs for July suggests that growth in EM industry remained soft at the start of Q3, with activity in Emerging Europe weakening sharply. The surveys also provide further evidence that price pressures are easing, supporting our view that …
1st August 2019
Net capital outflows from emerging markets look to have persisted last month, suggesting that the US-China trade war continued to weigh on investor sentiment. The truce announced at the late-June G20 meeting should have eased investors’ worries, but we …
17th July 2019
EM investment growth probably slowed to its weakest rate in twenty years in early 2019, although most of that seems to be related to tighter financial conditions and low commodity prices rather than the trade war. While there are signs that investment is …
5th July 2019
The further fall in the EM manufacturing PMI last month suggests that EM growth slowed in Q2 and the forward-looking components of the survey point to a weak start to the third quarter. The EM manufacturing PMI fell to a five-month low of 49.9 in June, …
1st July 2019
EM inflation increased to its highest level in more than a year and a half in August, and we think that this has further to run over the coming months. One consequence is that the monetary policy in much of the emerging world is likely to tighten. … EM …
28th September 2018
In previous EM currency crises, real interest rates have increased (on average) by around 10.5%-11.0%-pts in the following year and remained more than 6.5%-pts above pre-crisis levels over the subsequent two years. In Argentina, real interest rates are …
13th September 2018
In the three years after a currency crisis, EMs almost always experience a collapse in imports, but the performance of exports is more mixed. Argentina looks similar to those economies that have seen little impact on exports. Turkey’s large manufacturing …
12th September 2018
The extent of the falls in EM currencies seen since April have generally been closely correlated with the degree of countries’ external vulnerabilities. On almost all measures, Turkey and Argentina stand out. Arguably, the Brazilian real has fallen …
24th August 2018
Both Turkey and Argentina have now suffered currency crises this year. In previous EM currency crises, economies experienced a sharp slowdown in GDP growth, averaging 5-6%-pts, and a rise in inflation, averaging 4-5%-pts, in the following couple of years. …
16th August 2018
Financial risks remain low in the emerging world. However, since our last Financial Risks Monitor, currency vulnerabilities have increased in a handful of countries. … Currency vulnerabilities building in a few …
16th April 2018