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Friendshoring into India has for the most part been limited to high-end manufactured goods, but broader supply chain reconfiguration into the country could take place if the Trump administration imposes a 60% tariff on China. Trump has also been critical …
21st November 2024
The experience of the first Trump administration suggests that other countries will retaliate to the imposition of new US tariffs but in a way that is measured and minimises the risk of escalating tensions with Washington. The imposition of …
20th November 2024
We held a series of client meetings in the US last week which focused on the implications of Trump’s victory in the US election and the spillovers to EMs. This Update answers some of the most frequent and important questions that came up. What impact will …
US President-elect Donald Trump’s plans to curb immigration and undertake a mass deportation of undocumented migrants could boost labour supply in countries that are the source of migrants. But there could be social and fiscal costs, as well as lower …
18th November 2024
The environment of higher US Treasury yields and a stronger dollar that we think will accompany a second Trump administration is one that, historically, has been associated with crises in EMs with large macro imbalances. The good news is that currency …
12th November 2024
Despite the tick-up in the EM manufacturing PMI in October, manufacturing activity appears to have remained soft and we think this will be the case over the rest of the year. The surveys suggest that goods price pressures were contained last month, but …
4th November 2024
We think that if Vice President Harris wins the US presidential election next week, she would be more likely to stick to policy continuity, and EM risk premia would remain low. If former president Trump is elected, we would expect an initial adverse …
1st November 2024
This is a revamped version of our quarterly Financial Risk Monitor to include commentary and analysis of our latest EM risk indicators. Currency risks ease further, regional divergence among fiscal risks Financial vulnerabilities have declined further …
30th October 2024
EMs are playing a growing role as substitute markets for Chinese exporters that face rising trade barriers in DMs. A second trade war with a re-elected President Trump would only accelerate that shift. It is plausible that a sizeable portion of the loss …
Our measure of capital outflows from EMs has jumped to its highest level since July 2022 amid the recent surge in US Treasury yields and strengthening of the dollar. If Donald Trump wins the US election, there is plenty of scope for these market moves to …
29th October 2024
EM GDP growth picked up in Q3, but we expect growth to slow over the coming quarters - despite the recent stimulus announcements in China. The threat of more protectionist trade policy in the US poses an additional downside risk to our already …
24th October 2024
We held online Drop-In sessions this week to discuss how we factor the US election into our thinking on the macro and market outlook for the US and other parts of the world. See here for a recording of the session focused on the US and here for the rest …
A victory for Donald Trump in the US election would probably result in higher US Treasury yields and a stronger dollar. That’s an environment in which central banks in EMs with strained balance sheets (notably Turkey) could hike rates and others that are …
The outcomes of the EM central bank meetings since the beginning of October underscore the point that Asia will lead the next phase of the EM easing cycle. Central banks in Central and Eastern Europe and Latin America are slowing the pace of (or pausing) …
21st October 2024
Several EMs have reached provisional agreements with creditors to restructure their sovereign debts in recent months, including Zambia, Ukraine, Sri Lanka and Ghana. In principle, restructurings should pave the way for improved fiscal positions, stronger …
17th October 2024
The BRICS+ summit in Russia next week is likely to see another push on expansion, mainly to close allies of China and Russia. But limited economic benefits for potential new members, divisions among existing members, and concerns (for some) about …
15th October 2024
China’s policy stimulus measures have generated large market moves but it is the fiscal element, which hasn’t been detailed yet, that has the potential to lift the economy. We’re not expecting a huge fiscal package and it may be less commodity-intensive …
10th October 2024
Wage growth remains strong across much of Latin America and Central Europe (CEE), and that has stalled the disinflation process in services in particular. This supports our view that, in general, central banks in these regions will keep policy tighter …
7th October 2024
Access to commodities – particularly critical minerals – is a growing area of competition between China and the West. And those EMs with deposits of the minerals used in new and low-carbon technologies are likely to see higher investment and, ultimately, …
3rd October 2024
The fall in the EM manufacturing PMI in September suggests that growth slowed last quarter and we think this will continue over the coming months. The PMIs did at least provide encouraging signs that price pressures continued to ease. The EM manufacturing …
1st October 2024
The strike by Israel in Lebanon that killed Hezbollah’s leader represents a major escalation of hostilities in the Middle East and all eyes are now on the next actions by Israel and Iran. On its own, this escalation would point to higher oil prices and …
30th September 2024
Capital inflows into EMs have rebounded over recent weeks amid the start of the Fed’s easing cycle. Looking ahead, we expect EM inflows to hold up well as global monetary conditions ease further. In general, EMs are not especially dependant on foreign …
26th September 2024
Table of Key Forecasts Overview – Aggregate EM growth is entering a softer patch, despite the tailwind from the Fed’s easing cycle. Growth concerns will prompt central banks in much of Asia to cut interest rates. But stubborn inflation pressures elsewhere …
25th September 2024
After the Fed recently delivered its first rate cut, we look at previous US loosening cycles to analyse how emerging markets assets have performed. This time around we expect the US to skirt a recession, and our view is that most of the easing cycle is …
20th September 2024
EM recoveries are beginning to slow and will continue to do so over the coming quarters. Within this there will be regional variation, with Asia the outperformer and Latin America the laggard. Headline inflation rates will end the year above target in …
17th September 2024
We recently held a series of EM-focused client meetings in Switzerland and Germany which covered a wide range of topics, including the impact of global fracturing , AI and the green transition on emerging markets. This Update answers several of the …
16th September 2024
The Fed’s upcoming monetary easing cycle will probably provide less of a tailwind to EMs than is widely thought. While it’s likely to give some central banks (such as in the Gulf, Mexico and Indonesia) a green light to lower interest rates, EM rate …
12th September 2024
We held online Drop-In sessions earlier this week to discuss the outlook for major DM and EM economies and the risks that they face as we look forward to 2025. (See a recording here .) This Update answers some of the questions that we received, including …
5th September 2024
After a large fall in July, the EM manufacturing PMI only edged up slightly last month, suggesting that the sector fared worse in Q3 than in the first half of the year. The PMIs did at least provide encouraging signs that price pressures eased. The …
3rd September 2024
We think the rally in developed market government bonds has gone a bit too far and that yields will rise a little despite (further) rate cuts by the major central banks. One exception is the UK where we still think investors are expecting an excessively …
30th August 2024
EM recoveries are beginning to slow and should continue to do so over the coming quarters. Within this there will be regional variation, with Asia the outperformer and Latin America the laggard. Headline inflation rates will end the year above target in …
29th August 2024
Capital flows into EMs reversed course during the bout of market turmoil earlier this month. But the decline was no larger than that seen in other risk-off periods this year and inflows have since rebounded sharply, in line with the broader recovery in …
21st August 2024
The protests that have swept several EMs in recent weeks are likely to have a longer-lasting economic impact in countries with weak balance sheets and/or where they lead to a major shift in policy. To us, that suggests that the economic hit from recent …
20th August 2024
The global macroeconomic risks surrounding a possible ceasefire deal between Israel and Hamas are asymmetric. An agreement – while having significant economic consequences for countries in the region – would probably not itself be a game-changer for …
19th August 2024
EM goods export growth has accelerated over the past year despite a slowdown in economic growth in DMs. We think this is being driven by three structural factors: Chinese overcapacity, the AI revolution and friendshoring. These will continue to shape …
15th August 2024
Signs of a thaw in frosty relations between India and China don’t point to a fundamental realignment in India’s position in a fracturing global economy. But they highlight a growing theme of some EMs tactically courting investment from China to put …
13th August 2024
Heightened US recession worries have helped unwound some of the stretched positions in high-carry EM currencies, resulting in their exchange rates moving closer to their “fair values” (judging by our models). While our base case is still for a US soft …
9th August 2024
Fears of a US recession have rattled EM equity markets at a time when EM economies themselves are showing more pronounced signs of weakness. Most EM currencies have held up well, suggesting a dovish tilt may come from EM central banks – particularly those …
5th August 2024
The sharp fall in the EM manufacturing PMI suggests that the recent strength of industry may not be sustained in Q3. The declines in the PMIs were broad-based, although they are still relatively high in most of Asia. The PMIs also provided encouraging …
1st August 2024
This is a revamped version of our quarterly Financial Risk Monitor to include commentary and analysis of our latest EM risk indicators. Currency risks continue to ease, fiscal risks remain moderate Financial vulnerabilities have continued to ease across …
Our view on emerging market local-currency government bonds is broadly upbeat for the next year or so. We think returns will be largest, in common-currency terms, in Emerging Asia. It’s been a mixed year so far for local-currency sovereign bonds in …
31st July 2024
Donald Trump’s comments on the Fed have brought the issue of central bank independence into the spotlight. This is not just a concern in the US but an issue that is rearing its head in a number of EMs too. In general, these fears look overdone. But …
29th July 2024
A growing number of EMs have adopted fiscal rules to improve investor confidence in the management of their public finances. But the recent deterioration in fiscal health in some EMs has led to the breach (or at least threat of a breach) of these rules. …
23rd July 2024
EM recoveries have been stronger than expected this year, but growth in aggregate will slow over the coming quarters. Within this there will be regional variation, with Emerging Asia the outperformer and Latin America the laggard. While we still expect …
18th July 2024
While the global monetary policy loosening cycle is now well underway, there is more nuance than you might assume. Recent data have made us more confident that cuts (or further cuts) are to come in the US and Canada. But in Australia, the UK and large …
Net capital inflows into EMs remained positive over the past month, largely reflecting continued strong inflows into EM bonds, particularly Turkey, while there were out flows post-election in Mexico and South Africa. Policy turnarounds in some EMs and …
11th July 2024
One of the takeaways from our latest Emerging Markets Outlook is that the EM business cycle is unusually unsynchronised. We expect some convergence as the effects of the enormous macro shocks of recent years wash out. But by the same token, we shouldn’t …
3rd July 2024
The EM manufacturing PMI rose to a three-year high in June, driven by improvements in the surveys in much of Asia which have continued to benefit from strong export demand. Manufacturing recoveries are progressing more slowly in parts of Europe. The PMIs …
1st July 2024
This page brings together our analysis of how Donald Trump's return to the White House will affect the outlook for emerging economies. Use the Table of Contents on the right to navigate. All of our analysis on the election, including the implications for …
28th June 2024
The Emerging Markets Economic Outlook contains analysis and forecasts for the seven emerging regions we cover: China, India, other Emerging Asia, Latin America, Emerging Europe, the Middle East & North Africa and Sub-Saharan Africa. It also contains …
27th June 2024
