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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
While EM assets, especially in Latin America and EMEA, have been among the worst hit by the fallout from the coronavirus pandemic, we think that they will regain some of the ground lost over the past few months. But even then, we expect that most will end …
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 …
The real-time economic and market disruption from the coronavirus means that much of the data released during the past month offers little insight into current developments in the emerging world. Accordingly, this publication will now focus on the most …
29th April 2020
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 …
Table of Key Forecasts Overview – We estimate that aggregate EM GDP will shrink by 4% this year, by far the worst outturn since reliable records began in 1960. The recovery will be fitful, with output at an aggregate level likely to remain below its …
28th 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 real-time economic and market disruption from the coronavirus means that much of the data released during the past month offers little insight into current developments in the emerging world. Accordingly, this Chart Book focuses on the most timely and …
27th 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 …
This Activity Monitor outlines five key points on the coronavirus fallout for EMs, including what we can say about the impact so far. At the very least, it looks like the virus will cause aggregate EM GDP growth over this year as a whole to slump to its …
28th February 2020
The economic fallout from the coronavirus outbreak is likely to be particularly severe for a number of frontier markets. Due to its deep integration into global supply chains, Vietnam’s economy will be disrupted more than most by China’s factory closures. …
27th February 2020
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
There are early signs that the economic disruption resulting from China’s measures to contain the coronavirus is hitting supply chains and trade in Emerging Asia. There is also some tentative evidence of a hit to the trade further afield. EM exports had …
21st February 2020
The coronavirus is severely impacting China’s economy and the incoming data suggest that this is spilling over to other economies, particularly in Emerging Asia. Tourist arrivals to Thailand are down by 50% y/y, while trade data for Korea collapsed in the …
20th 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 impact of the coronavirus means aggregate EM GDP is likely to have contracted in q/q terms for the first time since the global financial crisis in Q1. If the outbreak is contained quickly, most lost output should be recovered later in the year. But if …
12th February 2020
Even if the coronavirus outbreak in China is brought under control and the recent moves in equity and bond markets unwind, we think that most EM assets will not make significant gains this year. This reflects our long-held pessimistic view of China’s …
11th 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 …
The coronavirus outbreak could expose financial vulnerabilities in China and other EMs if factory and other workplace closures are extended. Within China, property developers are particularly vulnerable to a halt in spending, though the government would …
6th 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 …
Our Tracker suggests that aggregate EM GDP growth stabilised in Q4, but it will no doubt weaken sharply in Q1. The coronavirus has already dealt a significant blow to China’s economy, and other EMs (mostly in the rest of Asia) will be hit via the impact …
31st January 2020
Official talks between Argentina’s new government and the IMF over the future of its record-breaking bailout started this month but, with the government having already restructured some of its local law debts, the need for urgent external financing has …
29th January 2020
There is no longer any doubt that China’s newly-identified coronavirus will hit its GDP growth in Q1 . And other parts of Asia (notably Hong Kong and Thailand) will suffer a drop in Chinese tourism receipts (see Chart 1), which could shave 1.5-2.0%-pts …
27th January 2020