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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
Recent moves by Angola and Zambia to restructure their public debts (or seek to) are unlikely to act as a trigger for a wave of similar steps by other debt-distressed frontiers. Indeed, their experience highlights the difficulties of reaching agreements …
30th September 2020
The latest activity and mobility data indicate that the EM recovery has lost some steam in recent months and we expect the pace of recovery to remain slow-going in the coming quarters. The main exception is China, where the recovery looks set to stay …
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 …
Despite the sell-off in most emerging market currencies over the past week, we continue to think that most will strengthen against the US dollar as the global economy recovers. In particular, we have recently revised up our forecasts for the Chinese …
24th September 2020
After an initial burst of growth following the lifting of national lockdowns, the latest activity data and mobility indicators point to a slower pace of recovery in most EMs in recent months. (See Chart 1.) This looks set to continue in the next few …
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 …
The rebound in EM exports continued in July, but further gains will be harder to come by from here. Indeed, the initial boost from re-opening economies is likely to fade and the slowing global recovery is dimming the outlook for exporters. Having tumbled …
17th 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
Most major EMs have managed to avoid acute balance of payments, banking sector and sovereign debt problems so far this year. But pockets of vulnerability remain. In particular, the risk of another full-blown currency crisis in Turkey is very high. And …
4th 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
Our Tracker suggests that EMs experienced net capital inflows last month for the first time since the coronavirus crisis began. Daily data suggest that net capital inflows were generally sustained in August, with Turkey a key exception. But even if …
26th August 2020
We think that the recent outperformance in local-currency terms of the MSCI EM Index relative to the MSCI World Index of developed market (DM) equities will continue as the global economy recovers further. (See Chart 1.) Back in April , when stock markets …
25th August 2020
A handful of countries in East Asia and Eastern Europe (notably Korea and Poland) are suffering from rising coronavirus cases again, but the hit to activity there resulting from precautionary consumer behaviour and renewed restrictions is likely to be …
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
The latest Q2 GDP figures show diverging depths of downturns between EMs (outside China), which can largely be explained by differences in the severity of virus outbreaks and the stringency of lockdowns. Recoveries are following this pattern too. China’s …
20th August 2020
EM goods exports rebounded reasonably strongly in June and July but, with the global recovery showing signs of losing momentum, further gains from here are likely to be slow-going. Having collapsed between February and April, our seasonally-adjusted …
19th 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
Argentina and Ecuador’s swift debt restructuring deals may provide a blueprint for other debt-distressed sovereigns. But these deals are not quite the success stories they seem at first sight. In any case, no two restructurings are ever alike, and other …
5th 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
Much of Latin America, South Africa, and parts of Asia – notably India and the Philippines – are still struggling to contain their first waves of coronavirus. And while policymakers in these countries have generally eased lockdowns over the past few …
31st July 2020
Our Mobility Trackers suggest that the EM recovery hit a snag in July, partly due to escalating coronavirus cases and tightening restrictions in some EMs (South Africa, Colombia, Hong Kong). This may form part of a broader trend across the emerging world, …
28th July 2020
Table of Key Forecasts Overview – An economic recovery is underway across emerging markets, but there are big differences in its speed and strength between regions and countries. China’s economy is making up lost ground rapidly and looks set to return to …
23rd July 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
EM goods exports remained weak in May, but partial June data point to a fledgling recovery. This is likely to continue in the coming months, although a number of factors look set to constrain the uptick. EM trade data for May were relatively …
16th July 2020
A handful of frontier market governments have issued Eurobonds over the past few months, but these could create vulnerabilities further down the line, particularly in Egypt, Ukraine and Bahrain. Moreover, many frontiers remain locked out of global capital …
14th 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
It is by no means inevitable that the coronavirus crisis puts a big permanent hole in the supply capacity of economies (i.e. their ability to produce goods and services). With the right government policies, many economies should be able more or less to …
29th 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
The latest hard data, and our Covid Recovery Trackers , suggest that the downturn in EM GDP bottomed out in April and activity is now edging higher. But the recovery is uneven, with rebounds strong in parts of Emerging Asia and Emerging Europe, and much …
22nd June 2020
While the incoming economic data continue to point to a nascent recovery in aggregate EM activity, some countries are being left behind. Recent figures from parts of Asia (China, Korea, Vietnam and Taiwan) and Emerging Europe (notably Poland), where …
19th June 2020
EM goods exports have slumped during the coronavirus crisis but perhaps by less than might have been expected. Indeed, shipments from parts of Asia appear to have been boosted by a surge in demand for medical and electronics products. A rebound in overall …
18th June 2020
While much of the rebound in EM currencies is now probably behind us, we think that many of them will rise a bit further against the US dollar as risky assets generally continue to recover. (See Chart 1.) We have revised up our forecasts for many emerging …
17th June 2020
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
Timely data suggest that April may have been the trough for EM GDP (see Chart 1), and activity at an aggregate level should recover – albeit slowly – in the coming months. But this is likely to mask a big divergence between regions. Large parts of …
29th May 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