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Inflation in the emerging world has generally surprised to the upside in recent months. But while inflation in most parts of Asia remains at levels which central banks are comfortable with, it has risen well above target in much of Emerging Europe and …
19th November 2021
The latest crisis engulfing Turkey is likely to make it harder for the country to roll over its external debts, with the banking sector particularly vulnerable. If Turkey’s crisis worsens, it may cause wobbles in a few EM currencies, but there are reasons …
18th November 2021
Net capital outflows from EMs have persisted in recent weeks and, looking ahead, a further rise in US Treasury yields could lead to larger outflows over the coming months. The good news is that – Turkey aside – vulnerabilities to outflows in most major …
16th November 2021
A significant share of the difference in headline inflation between Emerging Asia and other emerging regions has been driven by food inflation, which appears to be related to domestic conditions more than anything else. In Emerging Europe and Latin …
12th November 2021
The precipitous decline in Sri Lanka’s foreign exchange reserves means the risk of a near-term sovereign debt default is increasing. Elsewhere, Tunisia also stands out on account of its public debt problems. Fiscal challenges look severe in Ghana, Oman …
11th November 2021
The COVID-19 situation in many EMs has improved markedly over the past month or so as new infections have fallen sharply and vaccine rollouts have gathered pace. That said, the recent surge in virus cases in Emerging Europe serves as reminder that the …
5th November 2021
Among the major EMs, long-term fiscal problems look most challenging in South Africa and several large Latin American economies. And rising interest rates will make the fiscal squeeze needed to stabilise public debt-to-GDP ratios – and the hit to economic …
3rd November 2021
October’s PMIs suggest that manufacturing sectors in Southeast Asia are recovering from recent Covid waves, but supply constraints are taking their toll on industry in China, Brazil and parts of Emerging Europe. With supply shortages set to persist for …
2nd November 2021
The big increases in EM commodity producers’ trade balances this year are likely to go into reverse if, as we expect, the prices of energy and metals fall back. At the same time, the manufacturing-based EMs whose exports have been held back recently by …
29th October 2021
Table of Key Forecasts Overview – The EM recovery is now entering a more difficult phase as the boost from economic re-opening fades, supply shortages bite, growth in China weakens and the terms of trade worsen for major commodity producers. Lower vaccine …
28th October 2021
After what appears to have been a strong Q3, we expect recoveries in many EMs to enter a slower phase as re-opening boosts fade and goods shortages bite. Q3 GDP data due over the coming weeks should show strong quarter-on-quarter growth in Emerging …
26th October 2021
A big chunk of the recent rise in headline inflation in EMs has been driven by a jump in energy inflation which will be transitory. But core inflation has also risen in parts of Latin America and Emerging Europe and is likely to prove more persistent. …
22nd October 2021
The supply shortages that have affected many DMs have also intensified in emerging economies over the past couple of months. The automotive sector has been hit hard by global semiconductor shortages, weighing on recoveries in Mexico, Czechia and Hungary …
18th October 2021
The supply constraints that have hit global vehicle output have probably reduced the level of GDP by a modest 0.1-0.2% in most EM auto producers, but some countries like Czechia, Hungary and Mexico have suffered much bigger blows. And the drag from …
15th October 2021
Net capital inflows into EMs appear to have dropped over the past few weeks as investors have turned more risk averse. Looking ahead, a further rise in US Treasury yields could lead to larger outflows from EMs over the coming months. The good news is that …
13th October 2021
Irrespective of how the current problems in China’s property sector are resolved, property construction there is entering a period of structural decline. Among other EMs, the main effects will be felt in metals producers in Latin America and Africa, …
7th October 2021
A likely flood of exports from India and China, as well as a ramping up of donations from the US, should help to significantly boost vaccine supply for the many poor EMs in Africa and South and South East Asia whose vaccine rollouts lag behind. That said, …
6th October 2021
Although the emerging market manufacturing PMI ticked up last month, EM industry has been undergoing a slowdown for some time. And the surveys show that supply constraints are mounting, which is likely to weigh on manufacturers’ output in the months …
1st October 2021
It looks like EM exports rose further in August and, possibly, September too. And while we expect them to decline over the coming quarters, they will remain elevated. However, China’s property slowdown means that the risks to the export outlook for some …
29th September 2021
The latest data suggest that GDP growth in much of Emerging Asia slowed markedly in Q3, and that the recovery in Emerging Europe lost a bit of steam. Latin American economies generally strengthened, although the property slowdown in China poses a headwind …
27th September 2021
Several EM central banks have raised interest rates in the past couple of months on the back of growing inflation concerns (including many in Latin America) and/or strong economic recoveries (parts of Central Europe, Korea). Hiking cycles look set to …
23rd September 2021
Even if the current concerns around Evergrande abate, we think China’s stock market will continue to underperform many of those elsewhere over the next couple of years. Worries about Evergrande have continued to weigh on stock markets in China and …
22nd September 2021
If, contrary to our opinion and the consensus, a collapse of Evergrande ends up having a significant impact on the rest of the world, it will be because it first causes either major financial dislocation within China or a property-led slump in China’s …
Problems at Evergrande in China have dominated the headlines recently, but (sovereign) debt risks are brewing in other EMs too. Concerns about higher government spending and rising public debt levels are building in parts of Latin America . Meanwhile, …
21st September 2021
Net capital outflows from emerging markets appear to have eased over the past month, helped by a pickup in portfolio flows into South East Asia and India. Looking ahead, even if rising US Treasury yields were to trigger renewed outflows in the coming …
15th September 2021
Our financial conditions indices show that conditions remain loose by historic standards in most EMs. The key exception is Latin America, where conditions have tightened sharply this year due to rising interest rates and fiscal risks. This could pose a …
13th September 2021
The pandemic is likely to inflict lasting damage on potential growth in economies in much of Latin America, Africa and South and Southeast Asia, adding to the structural headwinds that they already faced. However, the risk of permanent scarring in many …
9th September 2021
The combination of large foreign-currency debt burdens, low FX reserves and weakening currencies means that the risk of sovereign defaults in Sri Lanka and Tunisia is growing. Elsewhere, China’s largest property developer, Evergrande, appears to be close …
With external positions in decent shape in most major EMs, the macroeconomic fallout from any tightening of external financing conditions should be limited. But there are a handful of EMs which look vulnerable. Turkey remains the key one, but risks are …
2nd September 2021
The EM manufacturing PMIs for August suggest that virus disruptions and supply chain constraints held back output in much of Emerging Asia. Manufacturing slowed in most other EMs too, although there were at least early signs in Emerging Europe that …
1st September 2021
We think slower growth in China will continue to weigh on the country’s stock market, as well as those of some other emerging markets (EMs). This month’s activity data out of China emphasised how the country’s economy has continued to slow. The latest …
27th August 2021
Most economies in Emerging Europe and Latin America look set for a strong third quarter and, while the near-term outlook for Southeast Asian economies remains challenging, high-frequency mobility provide early signs that at least parts of the region are …
25th August 2021
Having surged over the past year or so, EM exports appear to be peaking as final demand is levelling off and commodity prices are dropping back. That said, exports will likely remain at elevated levels for some time yet. Our seasonally-adjusted measure of …
23rd August 2021
Net capital out flows from major emerging markets have picked up sharply over the past couple of weeks, driven by virus concerns, growing expectations that the Fed will begin tapering asset purchases this year as well as falls in commodity prices. But …
20th August 2021
Several EM central banks have continued to tighten monetary policy over the past month or so in response to strong reopening rebounds ( Chile , Czech Republic , Hungary ) and/or rising inflation concerns ( Brazil , Mexico, Peru , Russia ). A few others, …
18th August 2021
Five years ago this October, we published a piece arguing that the “golden age” for emerging markets had ended and that they were entering a period of permanently weaker growth. Since then, many of the structural problems that we anticipated have begun to …
The disbursement of Special Drawing Rights (SDRs) from the IMF later this month is a boon for some Frontier Markets that face very high borrowing costs. But beyond this, it is hard to find many positives for Frontiers. The spread of the Delta variant, …
10th August 2021
The rapid spread of the Delta variant of the coronavirus adds to reasons to think that lacklustre economic recoveries lie in store for tourism-dependent economies in Africa, parts of the Middle East and South-East Asia. The weakness of tourism also …
4th August 2021
The $650bn allocation of IMF Special Drawing Rights (SDRs) that was finally signed off by the IMF yesterday should provide welcome relief to some frontier markets such as Ghana and Kenya that still face very high foreign borrowing costs. But it won’t …
3rd August 2021
June’s PMIs show that virus outbreaks have weighed on manufacturing in Southeast Asia while supply bottlenecks and weaker demand created headwinds for industry in China. In contrast, Indian industry rebounded sharply and manufacturing recoveries continue …
2nd August 2021
While the pandemic continues to hold back recoveries in Southeast Asia, the near-term outlook appears brighter in Emerging Europe and Latin America. However, low vaccine coverage in the latter means that economies remain susceptible to renewed outbreaks …
30th July 2021
Table of Key Forecasts Overview – Low vaccine coverage means that the threat to economic recoveries from the highly-contagious Delta variant is much larger in the emerging world than in developed economies. And EMs will take longer to return to their …
29th July 2021
After surging over the past year, the latest data provide signs that EM goods exports have now passed their peak. However, they are still likely to stay at elevated levels for some time yet. Our seasonally-adjusted measure of aggregate EM goods exports …
21st July 2021
The spread of the Delta variant of COVID-19 poses a much bigger risk to economic recoveries in emerging markets than in developed markets. India, South Africa, and South East Asia have suffered already or are suffering. And limited vaccine coverage in …
20th July 2021
Falling virus cases, strong economic recoveries and/or inflation worries prompted several more EM central banks – those of Czechia , Chile , Hungary and Mexico – to tighten monetary policy in the past month, joining Russia and Brazil. And a few others, …
15th July 2021
Net capital outflows from emerging markets have picked up over the past month following the Fed’s more hawkish turn at the FOMC meeting in early June. Outflows may intensify over the coming months, but the macroeconomic fallout in the major EMs should be …
14th July 2021
Budget deficits have narrowed from their 2020 peaks across the emerging world. The improvements in Brazil and Argentina – where deficits appear to be narrower than their pre-pandemic levels – provide welcome relief given both countries’ debt troubles, but …
8th July 2021
With the (usual) exception of Turkey, the strong rates of credit growth seen in some EMs including Brazil and Korea are unlikely to be sustained as policymakers have already started (or will soon turn to) tightening policy. The bigger concern is the …
6th July 2021
The PMIs for June show that manufacturing strengthened in most of Emerging Europe, but virus outbreaks, supply chain disruptions and a softening of demand created headwinds for industry in Asia. One common theme is that supply shortages persist, which is …
1st July 2021
We think investors may be overestimating how much monetary policy tightening is on the way in emerging markets (EMs), but still expect long-dated EM government bond yields to rise a bit from here. Over the past month the tightening cycle among EM central …
29th June 2021