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The batch of manufacturing PMIs for September point to further weakness in EM industry at the end of Q3. And the backdrop of slowing growth at home and a global economy heading for recession will keep EM industry subdued over the coming quarters. The …
3rd October 2022
The surge in energy prices this year (particularly gas) will have the biggest impact on Central and Eastern Europe (CEE) and push economies there into recession. There will be an impact in the rest of the emerging world but we expect it to be much smaller …
29th September 2022
The ramping up of the US Fed’s hawkish rhetoric has turbocharged the dollar’s appreciation against EM currencies, with most falling by 2-6% against the greenback since the start of the month. (See Chart 1.) Reluctant to allow currencies to slide too …
27th September 2022
Capital inflows into EMs have dropped sharply over the past few weeks as the US dollar has been on a tear. External financing is likely to remain challenging in this environment, posing a threat to EMs whose current account deficits have widened sharply, …
23rd September 2022
The strong dollar environment is particularly worrying for those EMs with large dollar debts, including parts of Latin America, Turkey and many frontier markets. But it’s also a concern for countries with large current account deficits (including parts of …
20th September 2022
The post-pandemic recovery in travel and tourism still has some way to go in parts of the world that have been slower to lift restrictions, such as in Asia. And China’s reluctance to move away from its zero-COVID approach means tourism for leisure …
15th September 2022
Shifts in China’s approach in debt talks with Zambia and planned changes to the Common Framework, such as establishing firm timelines, will go some way to smoothing the debt restructuring process for affected EMs. For now, though, there are reasons to …
14th September 2022
Emerging markets will account for more than half of global GDP within the next decade. Headlining this, India is on course to become the world’s third largest economy by 2030. And EMs with rapid population growth, healthy manufacturing sectors or those …
6th September 2022
Tighter global monetary policy and the strength of the US dollar continue to punish a number of frontier markets with weak sovereign balance sheets. Meanwhile, worries about Turkey’s balance of payments position remain acute, and external risks are …
5th September 2022
The fall in the EM manufacturing PMI to a three-month low last month was driven by China’s recovery stalling and weakness in export-oriented manufacturing EMs in parts of Asia and Eastern Europe. The one crumb of comfort is that price pressures have eased …
1st September 2022
We think developed market (DM) monetary policy may be a threat to emerging market (EM) assets for some time yet . Hawkish monetary policy has arguably been the biggest headwind for global financial markets this year. Rapid upward revisions to …
31st August 2022
While EM real effective exchange rates have held up better than their nominal exchange rates against the dollar since 2021, we think there are some economies where appreciations look stretched, and nominal exchange rates may need to adjust further. …
26th August 2022
The growth outlook for the emerging world has taken a turn for the worse. The latest activity data for China suggest that the post-lockdown recovery has lost steam. The PBOC has responded by lowering interest rates and we expect further easing, but we …
23rd August 2022
Recent national accounts data show that many of the major EMs experienced a difficult second quarter . Looking ahead, a combination of weaker global demand, high inflation and rising interest rates is set to weigh on the outlook over the coming months. …
22nd August 2022
Despite the broad-based rebound over the past month or so, we expect deteriorating risk sentiment to put renewed pressure on most emerging market (EM) currencies before long. This Update zeroes in on which EM currencies are most vulnerable to large falls. …
19th August 2022
Aggregate EM inflation came in at its highest rate since 2008 last month, but there are signs that it is starting to stabilise and it should fall back in the coming months. For central banks in Emerging Europe and Latin America that have already hiked …
17th August 2022
Capital outflows from EMs have eased over the past month, helping to stabilise local asset prices. But we think outflows will pick up again before long. That’s a threat to those EMs whose current account deficits have widened or are widening sharply, …
10th August 2022
While DM central banks are currently raising interest rates in earnest, the past week has brought signs that tightening cycles are now nearing an end in parts of the emerging world. Indeed, with interest rates now well above neutral in much of Emerging …
8th August 2022
The spreads of sovereign dollar bonds over US Treasuries are in distressed territory in almost a third of EMs covered in the JP Morgan EMBI Index, with the majority of those being frontier markets. In this note, we answer five key questions on default …
3rd August 2022
The drop in the S&P Global EM manufacturing PMI last month suggests that a fading re-opening boost in China and weak global demand have caused industry to slow. And in parts of Eastern Europe, the surveys point to sharp falls in output. The one crumb of …
1st August 2022
Table of Key Forecasts Overview – EM GDP growth will be weaker than most expect in 2022 and 2023 as China’s economy rebounds only moderately and activity slows elsewhere. Inflation is set to remain elevated for some time yet, and policy rates will be kept …
26th July 2022
With global economic growth weakening and risk sentiment unlikely to rebound sustainably this year in our view, we think that EM currencies generally will remain under pressure over the next several months and that there are a handful of countries where …
The rise in local currency bond yields across the emerging world poses a particular risk to fiscal positions in those EMs with large government financing needs and a short average debt maturity. Egypt, Pakistan, and Ghana stand out as those most …
21st July 2022
Most large EMs are weathering the environment of rising global interest rates and a strong dollar relatively well. That said, countries with large current account deficits , most notably Chile and Hungary , are finding their currencies in the crosshairs, …
18th July 2022
We held a Drop-In earlier today to discuss recent developments in Sri Lanka, where the economic and political crisis is going from bad to worse. This Update answers several of the questions that we received. How bad is the economic situation? In a …
14th July 2022
The effects of the pandemic followed by the war in Ukraine have pushed a growing number of EMs into debt distress. And while some (Tunisia, Ghana) look likely to follow Sri Lanka’s path into default, at this stage, default risks in the largest EMs look …
Capital outflows from EMs picked up over the past month and are likely to persist over the rest of the year. That’s a particular threat to those EMs whose current account deficits have widened or are widening sharply, including Turkey, Chile and parts of …
12th July 2022
Tightening cycles in Latin America and Emerging Europe are already at an advanced stage. Some 70-80% of the likely rate hikes in their cycles have already been delivered and policymakers will bring these to an end before the end of the year. But inflation …
6th July 2022
The S&P Global EM manufacturing PMI hit its highest level in over a year last month, but that was almost entirely driven by a recovery in China. The surveys softened across most of the rest of the emerging world, with external demand a key area of …
1st July 2022
We expect the yields of emerging market (EM) local-currency (LC) and dollar sovereign bonds to rise further and EM equities to lose more ground as “risk-free” rates continue to climb and global economic growth disappoints . EM bonds and equities have come …
30th June 2022
Aggregate EM food inflation has risen to its highest rate since 2008 and, while it should fall back in 2023, it’s likely to stay extremely high for at least the next four-to-six months. That will keep consumer spending under pressure and provide another …
28th June 2022
We doubt that aggressive policy tightening by developed market (DM) central banks will be followed by a series of financial crises in major emerging market (EM) economies in the way that it has at times in the past. Even so, we still suspect that global …
27th June 2022
A handful of EM central banks have ramped up FX sales to provide support to weakening currencies over the past couple of months. And with inflation high and the US dollar likely to strengthen further, others could follow suit. FX intervention is unlikely …
24th June 2022
Having surged in recent months, there are some tentative signs that EM inflation is nearing a peak. Our measure of aggregate EM inflation was steady at 7.0% y/y between April and May and some indicators of pipeline price pressures have eased. But even so, …
23rd June 2022
Shortages of food supplies and surging prices have led some EMs to impose export restrictions on key agricultural products, a trend that threatens to become more prevalent and serve to keep prices elevated and inflation high. Some EMs are also attempting …
16th June 2022
Capital outflows from EMs appear to have eased over the past month, but rapidly tightening external financing conditions mean that this won’t last for long. Large outflows already seem to have pushed Turkey to the brink of a(nother) currency crisis, and …
14th June 2022
After months of aggressive interest rate hikes, the end of tightening cycles in parts of Emerging Europe and Latin America is creeping closer. But inflation concerns mean that policy rates are likely to remain high for a long time yet. Meanwhile, …
10th June 2022
The effects of the war in Ukraine and strong dollar are causing sovereign debt risks to build in a handful of frontier markets with weak balance sheets, while public debt dynamics in parts of Emerging Europe also look increasingly concerning. Meanwhile, …
7th June 2022
The S&P Global EM Manufacturing PMI for May suggests that the easing of virus-related disruptions in China supported a small rebound in EM manufacturing last month, but the sector remains very weak. And the effects of the war in Ukraine are taking an …
1st June 2022
While the yields of emerging market (EM) local-currency (LC) and dollar-denominated sovereign bonds have dropped back in recent weeks, we expect them to resume their rise before long . After trending up for most of this year, the yields of 10-year LC …
31st May 2022
Recently-released Q1 GDP figures showed that most EMs performed well at the start of this year, but headwinds are growing. Lockdowns are dealing a heavy blow to China’s economy and spillovers from the war in Ukraine will weigh on Emerging Europe in …
26th May 2022
Upside surprises to inflation coupled with a hawkish Fed have prompted aggressive monetary policy responses by central banks across the emerging world over the past month. Policymakers in Czechia , Romania, Chile and Egypt raised interest rates by more …
23rd May 2022
Net capital outflows from EMs appear to have picked up over the past few weeks amid the general risk-off mood in global financial markets. This is a worrying development for countries with fragile external positions, notably Turkey and some smaller …
18th May 2022
Higher food and energy prices go some way to explaining the rise in headline inflation rates across the emerging world, but this is only part of the story. Core inflation has also jumped in many EMs, especially in Emerging Europe and Latin America. This …
16th May 2022
There has been plenty of doom and gloom surrounding the outlook for frontier economies over recent months, particularly Sri Lanka and Tunisia. But there are some places where we hold more upbeat views. Frontier economies in the Gulf will benefit from high …
12th May 2022
The strong dollar and spill-overs from the war in Ukraine have caused sovereign debt risks to escalate in some frontier markets. But most large EMs have far stronger public sector balance sheets, mitigating much of the risk of the “classic” emerging …
11th May 2022
While a stronger dollar is generally regarded as a headwind for EMs, we think it will only be a minor one for most major EMs, particularly compared with the headwinds from weakness in China, spillovers from the war in Ukraine, and domestic monetary …
6th May 2022
Having surged over the past two years, there are signs that EM exports may now have passed their peak. That will weigh on economic growth, particularly in parts of Asia. Manufacturers in the emerging world have been among the main beneficiaries from the …
4th May 2022
Table of Key Forecasts Overview – Lockdowns in China and spillovers from the war in Ukraine will slow the EM recovery and growth is likely to be weaker than most expect. Recession risks are rising in Emerging Europe in particular. On the flipside, …
28th April 2022
Many EMs have started the year on a solid footing, but challenging months lie ahead. While high inflation is likely to weigh on consumption, spillovers from lockdowns in China and the war in Ukraine are likely to exacerbate supply shortages and hamper …
25th April 2022