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The coronavirus is severely impacting China’s economy and the incoming data suggest that this is spilling over to other economies, particularly in Emerging Asia. Tourist arrivals to Thailand are down by 50% y/y, while trade data for Korea collapsed in the …
20th February 2020
The outbreak of the coronavirus appear to have caused a pull back of net capital inflows to EM bond and equity markets on a similar scale to that seen during flare-ups in the US-China trade war last year. But the most recent figures suggest that inflows …
14th February 2020
The impact of the coronavirus means aggregate EM GDP is likely to have contracted in q/q terms for the first time since the global financial crisis in Q1. If the outbreak is contained quickly, most lost output should be recovered later in the year. But if …
12th February 2020
Even if the coronavirus outbreak in China is brought under control and the recent moves in equity and bond markets unwind, we think that most EM assets will not make significant gains this year. This reflects our long-held pessimistic view of China’s …
11th February 2020
The economic disruption from the coronavirus outbreak will lead to further rate cuts in much of Emerging Asia. And in those countries where currencies have fallen sharply, the moves have not been big enough to worry policymakers. As thing stand then, this …
The coronavirus outbreak could expose financial vulnerabilities in China and other EMs if factory and other workplace closures are extended. Within China, property developers are particularly vulnerable to a halt in spending, though the government would …
6th February 2020
The coronavirus outbreak will result in much weaker growth in China in Q1 and has hit tourism sectors elsewhere. If factory closures in China are prolonged, the epidemic could start to cause more severe economic damage to the rest of the emerging world, …
4th February 2020
The January batch of EM manufacturing PMIs generally held up well, but the surveys are yet to capture the economic damage from the coronavirus outbreak. Extended factory closures in China are likely to disrupt EM industry this quarter, particularly in …
3rd February 2020
Chinese international tourist spending has surged over the past decade, which is one reason to think that the economic spillovers will be greater for the coronavirus than they were for SARS. But outside of Asia (and Mauritius), Chinese tourist spending is …
Our Tracker suggests that aggregate EM GDP growth stabilised in Q4, but it will no doubt weaken sharply in Q1. The coronavirus has already dealt a significant blow to China’s economy, and other EMs (mostly in the rest of Asia) will be hit via the impact …
31st January 2020
Official talks between Argentina’s new government and the IMF over the future of its record-breaking bailout started this month but, with the government having already restructured some of its local law debts, the need for urgent external financing has …
29th January 2020
There is no longer any doubt that China’s newly-identified coronavirus will hit its GDP growth in Q1 . And other parts of Asia (notably Hong Kong and Thailand) will suffer a drop in Chinese tourism receipts (see Chart 1), which could shave 1.5-2.0%-pts …
27th January 2020
We expect that the broad-based EM easing cycle has further to run in the coming months but, as growth and inflation in many countries rise, it will be less widespread than in 2019. More importantly, we think that there will be some dovish surprises …
23rd January 2020
We estimate that net capital outflows from Emerging Markets fell to a six-month low in December, and they probably declined further at the start of this year. With global growth close to bottoming out and the Phase One US-China trade deal now agreed, …
Table of Key Forecasts Overview – After a bad 2019, aggregate emerging market growth is likely to strengthen this year, driven by improvements in large EMs including Brazil, Russia and India. But recoveries will generally be lacklustre. And growth in …
22nd January 2020
The latest data suggest that y/y EM export growth turned positive in December, having contracted for much of 2019. We think this will mark the start of a run of better EM export figures. Meanwhile, the Phase One US-China trade deal removes a downside risk …
17th January 2020
The deal signed yesterday between the US and China was broadly as expected and has not led us to change our economic forecasts. The apparent ceasefire in the battle over tariffs removes a downside risk to growth. But tariffs remain high and we suspect …
16th January 2020
This decade is likely to be marked by slower growth and softer inflation in emerging markets. One consequence is that interest rates will probably be lower than most currently anticipate. A broad-based monetary easing cycle has been underway in emerging …
13th January 2020
Our measure of aggregate EM inflation, which hit a four and a half year high last month, should fall over the course of this year as the disruption caused by African Swine Fever fades. But this is largely a China story. For most EMs, higher oil prices and …
9th January 2020
The PMIs for December suggest that EM manufacturers, barring those in Latin America, ended 2019 on a firmer footing. Nonetheless, the external backdrop will remain challenging in 2020. The EM manufacturing PMI held steady at 51.0 in December for the …
2nd January 2020
EM activity slowed at the start of Q4 and aggregate growth in 2019 as a whole is likely to be the weakest since 2015. Conditions should improve in 2020, but we think growth across many EMs will disappoint. All but a few of the smaller emerging economies …
20th December 2019
Argentine and Lebanese sovereign dollar bond spreads have narrowed over the past month (see Chart 1), but we think that they will widen again before long. The narrowing has been most dramatic in Argentina, where the new finance minister struck a …
19th December 2019
2020 will be a year in which EM GDP growth edges up and many major central banks catch investors by surprise. This Focus outlines our key calls for next year. 1. Policymakers in China will ease monetary policy significantly as the economy slows . Growth …
18th December 2019
Economic growth across the emerging world has slumped this year but, with the important exception of China, recoveries should take hold in 2020. Recent interest rate cuts will keep financial conditions accommodative. And governments will continue to …
17th December 2019
The contraction in EM export growth deepened in October and November but should ease in the next few months as the drags from lower commodity prices and a shift in the Asian electronics cycle fade. Meanwhile, although trade deals agreed by China and …
Optimism about an imminent resolution to the trade war between the US and China and subsiding protests in Latin America have supported EM currencies over the past month. But, barring a few exceptions, we think that they will weaken against the US dollar …
11th December 2019
On a net basis, capital continued to flow out of Emerging Markets (EMs) last month, and we think that 2020 will be the seventh consecutive year of outflows. Capital flows play a major role in EMs, as they finance spending and affect financial market …
Concerns about foreign currency debts in emerging markets have flared up again in recent weeks, but we think that the worst of these fears are probably overdone. FX debt burdens in most EMs have fallen as a share of GDP in recent years and balance sheet …
3rd December 2019
The November manufacturing PMIs point to diverging prospects for EM manufacturers at a regional level, with conditions improving in most of Emerging Asia but deteriorating in Emerging Europe. The EM manufacturing PMI stayed at 51.0 in November for the …
2nd December 2019
EM GDP growth picked up in Q3 and, despite a likely slowdown in China, we expect that aggregate EM growth will be a touch stronger in 2020 than it has been this year. Most major EMs have now released Q3 GDP data. By our estimates, EM GDP growth edged up …
29th November 2019
Ecuador this month joined the handful of frontier economies where sovereign dollar bonds are trading at levels commonly associated with default. (See Chart 1.) But with the IMF likely to stand by the government, we think that default fears are overdone …
28th November 2019
We estimate that net capital outflows from emerging markets (EMs) eased in October, and more timely data point to a further improvement so far this month. But we doubt that, on a net basis, capital will flow in to EMs anytime soon. Capital flows play a …
20th November 2019
The year-on-year rate of EM export growth should turn positive in the coming months, but this will mainly reflect favourable base effects from the Asian electronics cycle rather than stronger underlying demand. The latest EM export data have been weak . …
19th November 2019
Ongoing protests in Chile, Hong Kong and Lebanon will weigh on their economies and financial markets, but to different degrees. While the tightening of financial conditions and strikes in Chile will hit activity in Q4, the strength of the government’s …
15th November 2019
A new wave of structural reforms, if implemented, could plausibly lift average EM GDP growth by over 1%-pt in the 2020s. But we doubt that these reforms will be forthcoming. Even if they are, EM GDP growth would still be much weaker than the 6% average …
14th November 2019
EM equities have continued to rise over the past month, seemingly driven by optimism about an imminent US/China trade deal and some improvement in the economic data. But we are sceptical that the rally will last, and forecast that EM equities will tread …
13th November 2019
We expect most major EMs to loosen fiscal policy further next year. Weak public finances mean that a few major EMs, notably Brazil and South Africa, will need to tighten policy. But aside from Argentina, the risk of messy sovereign debt crises is …
7th November 2019
More EMs’ income levels have fallen relative to the US’s than have risen this year, the first time this has happened since the 1990s. This is likely to be a sign of things to come in the 2020s. There are lots of ways of defining catch-up growth, but our …
6th November 2019
The EM manufacturing PMI stabilised in October and the breakdown provides further evidence that the downturn in EM export growth may have bottomed out. That said, any recovery is likely to be slow going. Having risen to a six-month high in September, the …
4th November 2019
The spotlight has shifted back onto weak sovereign debt positions in Frontier Markets this month after the election of a left-wing president in Argentina and growing political instability in Lebanon. As we see it, debt write-downs are the only way out for …
31st October 2019
Our Trackers suggest that growth slowed across large parts of the emerging world in Q3. But aggregate EM growth is probably close to bottoming out and we expect that it will strengthen a little in 2020. We estimate that aggregate EM GDP growth eased to …
30th October 2019
Economic and financial vulnerabilities are generally low across much of the emerging world, but there are a handful of weak links. Argentina’s sovereign debt vulnerabilities remain high and, whichever direction the new president takes, we think that a …
29th October 2019
While protests have spread across several EMs, most notably Hong Kong, parts of Latin America and Lebanon, there is no mechanical link between unrest and economic growth and asset prices. As it happens, large protests in emerging markets are comparatively …
25th October 2019
Governments that have been elected during episodes of severe market stress and have managed to turn things around have done so by securing some form of bailout package and announcing a credible reform plan. But they have also usually benefitted from …
23rd October 2019
After small net inflows in Q2, we estimate that emerging markets (EMs) experienced net outflows in Q3. With the recent detente in the trade war unlikely to continue, further capital outflows are likely in the coming quarters. Capital flows play a major …
While the downside risks of a global trade war are often overstated, we think the bigger concern is that the world splits into competing regional blocs that do not cooperate on trade or investment. This could cause global supply chains to splinter and …
22nd October 2019
The continued decline in core inflation across many emerging markets supports our view that most central banks’ easing cycles have further to run. Our measure of EM core inflation fell to 2.8% y/y last month (see Chart 1), the weakest rate since our …
18th October 2019
The EM export recovery paused in August and September, although we think exports should still strengthen over the coming quarters. This isn’t because of developments in the trade war – the recent improvement in the mood music is unlikely to be a prelude …
17th October 2019
Globalisation has peaked, with any further major integration unlikely. In fact, a policy-driven period of de-globalisation is increasingly likely. Flows of trade and foreign direct investment have flattened off as a share of nominal GDP over the past …
15th October 2019
Table of Key Forecasts Overview – Several large emerging markets, including Brazil, Russia and India, should emerge from recent weak patches over the coming quarters. But at an aggregate level, that will be offset by slowdowns elsewhere, most notably in …
11th October 2019
