The sell-offs in the Argentine peso and Turkish lira have sparked fears of broader turmoil in EM financial markets. But, so far at least, this has yet to materialise. Sovereign dollar bond spreads have actually narrowed over the past month in most major EMs; only in Argentina have they widened by a significant degree. And equity markets have held up well too. More generally, financial conditions across major EMs are looser than they were last year. Even so, weak external demand and the drag from past policy tightening means that while EM GDP growth appears to be bottoming out, there is unlikely to be a substantial recovery in the coming quarters.
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