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We estimate that the recent fall in commodity prices could knock 1%-pt off Emerging Market (EM) inflation over the coming months. With slower economic growth set to keep a lid on core inflation in most countries, the emerging world looks set for a …
22nd October 2014
In simple terms, the big winners from the recent drop in oil prices will be those EMs with large energy import bills, while the big losers will be the major oil exporters. But in reality the situation is more complex. The drop in oil prices, while …
15th October 2014
Although EM export growth slowed in August, the general trend since the middle of the year has been one of improvement and more timely figures suggest that the recovery resumed last month. However, a closer look at the data shows that the recovery has …
14th October 2014
Industrial production (IP) growth in the emerging world is very weak. In aggregate terms, EM output grew by just 2.0% y/y in August – the slowest rate of growth since the global financial crisis. The aggregate figure masks big differences between regions. …
10th October 2014
Local currency government bonds in developed economies have typically fared much better than those in emerging economies over the past year. This is evidenced by the fact that the yield of the JP Morgan GBI Broad Index of developed market bonds has fallen …
9th October 2014
For all the recent talk of a “great moderation” in EM growth, the uncomfortable truth is that the big slowdown in the emerging world actually occurred several years ago. More recently, growth has in fact been remarkably stable. Given the structural nature …
8th October 2014
September’s manufacturing PMI data suggest that the sector has lost some steam across the emerging world. The recent weakness has been largely concentrated in the BRIC economies, although there were further signs of a slowdown in Emerging Asia too. By …
3rd October 2014
Investors have started to face up to the prospect that previous hopes of a significant rebound in EM growth are likely to be disappointed. But while the new normal for EM growth is going to be much weaker than in the past decade, there are several bright …
1st October 2014
Our GDP Tracker suggests that EM growth has slowed once again in recent months. The latest slowdown has been concentrated in Latin America and Emerging Europe, but there are some signs that growth has started to weaken in parts of Asia too. All of this is …
30th September 2014
As the Fed moves towards a first interest rate hike, the Capital Economics Risk Indicator (CERI) shows that financial risks are at a decade low. As such, a systemic emerging market (EM) crisis seems unlikely. Nonetheless, one or two countries, notably …
26th September 2014
The sell-off in emerging market currencies so far this month has been broad-based, but we expect investors to become more selective soon. We think a number of currencies will probably rebound, while the currencies of economies with large current account …
25th September 2014
Major oil producers in the Gulf stand to lose the most in absolute terms from the recent fall in prices, but conservative management of the oil sector means that the region will simply save less. By contrast, the governments of many oil producers …
22nd September 2014
Concerns that the policy tightening implied by the latest Fed forecasts would eventually lead to higher US Treasury yields and hinder EM growth are probably misplaced. A handful of EMs are vulnerable to tightening global monetary conditions. But, …
18th September 2014
We are often asked whether the next big move in EM interest rates will be up or down, but in truth the sheer diversity of the economies within the emerging world renders any “one-size-fits-all” rule next to useless. In this Update, we split EMs into four …
17th September 2014
Emerging market (EM) currencies have had a rough ride recently, adding to what was already shaping up to be a poor year. Our synthetic EM exchange rate index is down by 1.5% against the dollar in the past month and by 5.5% since the start of the year as …
16th September 2014
There are good reasons to think that some EM currencies remain exposed to market turbulence as we move towards the first interest rate hike in the US. However, suggestions that the recent falls in EM currencies against the dollar are due to concerns about …
12th September 2014
The role of urbanisation in supporting growth in emerging markets is often overplayed. Although urbanisation can play an important role in supporting industrialisation, it doesn’t in itself drive economic growth. In the end, getting in place the right set …
11th September 2014
Emerging market equities are on track to outperform both developed and frontier market equities in Q3 for the first quarter in seven. We would not be surprised if emerging market equities continued to fare well over the next few years. … Emerging market …
EM export growth picked up in July, continuing the trend seen over the previous four months, and more timely data suggest that it strengthened further last month. However, there is a growing divergence between the performance of manufacturing-based …
9th September 2014
A handful of EMs – mainly in Asia – have taken steps to reduce their external vulnerabilities in the wake of last year’s “Taper Tantrum”. But these countries are the exception rather than the rule. Those EMs where external vulnerabilities are greatest – …
5th September 2014
August’s PMI data from the emerging world were something of a mixed bag. But one theme that stands out is that most export-oriented manufacturing economies are performing relatively well at the moment. By contrast, manufacturers in commodity-producing …
3rd September 2014
Our GDP Trackers suggest that although EM growth has been broadly stable over the past few months, a significant divergence in performance has opened up between regions. Growth in Asia seems to have accelerated over the past couple of months. In contrast, …
29th August 2014
Growth in the emerging world has remained stuck at around 4.5% y/y in recent months, but the aggregate number masks a recent divergence in regional performance. Growth has slowed in Latin America and Emerging Europe as weak commodity prices and lacklustre …
21st August 2014
Despite the recent attention given to the EM slowdown, it actually began back in 2010, and growth has been stuck at a sluggish rate for the last two years. The BRIC economies account for much of the weakness, but they have been far from alone in their …
20th August 2014
Emerging market exports rose at their fastest pace in over a year in June and more timely data suggest that export growth may have strengthened further last month. This improvement has been driven by faster export growth in Asia. In contrast, Latin …
11th August 2014
Having slowed over the past couple of years, there are signs that consumer spending in some parts of the emerging world is starting to recover. However, the pick-up has so far been confined to EMs in Asia and Central Europe. In contrast, consumer spending …
7th August 2014
According to the latest batch of PMI data, manufacturing activity across the emerging world strengthened in July supported largely by a continued improvement in Emerging Asia, in particular China. However, activity in the other EM regions is struggling to …
4th August 2014
Our GDP Tracker suggests that EM growth has accelerated a touch in recent months. Much of the pick-up has been due to a turnaround in Asia, including China. But while the outlook for China seems to have brightened a little, growth in the other BRICs – …
31st July 2014
The contribution that favourable demographics have made to emerging market growth over the past couple of decades is often overplayed. In reality, the growth of working age populations has played only a minor role in driving EM growth since the mid-1990s. …
29th July 2014
Growth in the emerging world’s largest economies, the BRICs, appears to have stabilised afterslowing at the start of the year. The official data from China show GDP growthedging up in Q2 on the back of targeted stimulus measures. In Russia, growth looks …
17th July 2014
After years of discussion, the five BRICS nations yesterday agreed to establish a development bank and a framework of currency swaps, dubbed the “Contingency Reserve Arrangement” (CRA). In this Update we answer four key questions about these new …
16th July 2014
The emerging market-wide trade surplus rose to a record high in US dollar terms in May. But while this would, at first sight, appear to be a positive development, much of the adjustment appears to be a result of weak import demand in a handful of …
15th July 2014
The legacy of the last decade’s sharp rise in private sector debt has kept credit conditions tight and domestic demand weak across a number of EMs over the past few years. And while some of them have managed to bring their debt ratios down, in many …
11th July 2014
Emerging Market export growth strengthened a little in May and may have accelerated further last month. Even so, the latest country-level trade figures have fallen short of expectations, and suggest that global demand may not be as strong as we had …
10th July 2014
Emerging market dollar-denominated corporate bonds outperformed similarly-rated US corporate bonds in the second quarter of this year. We expect this outperformance to continue. Admittedly, bonds issued by emerging market companies are arguably more …
8th July 2014
The latest batch of emerging market (EM) PMIs suggests that the rebound in EM manufacturing gatheredpace in June. The best performers are still in Asia and Central Europe, as well as Mexico, but there hasalso been a welcome improvement in the BRICs, …
4th July 2014
Fears of an EM-wide crisis have receded and the outlook for smaller EM manufacturers is brightening. But structural problems will continue to hold back the largest emerging economies even if, as seems likely, China avoids a hard landing. As a result, …
3rd July 2014
Financial markets in the emerging world have rallied in the past quarter as fears about the impact of Fed tapering and a hard landing in China have eased. But while the latest Capital Economics Risk Indicator (CERI) shows that the risk of a crisis in …
1st July 2014
Our Tracker suggests that GDP in the emerging world, in aggregate, has expanded by around 4.5% y/y in recent months which is in line with Q1’s outturn. Some of the more open EM economies have gathered momentum, but growth in the larger BRIC economies …
30th June 2014
The escalation of violence in Iraq over the past week or so has led to concerns that unrest in the Middle East might trigger another spike in oil prices. As it happens, the impact on world oil markets has so far been limited. But a sharp rise in prices …
25th June 2014
Financial conditions across the emerging world have eased in recent months, as continued policy support from central banks in the developed world has supported risk appetite. This in turn has reduced the immediate threat to emerging economies running …
19th June 2014
The slowdown in EM GDP growth over the past couple of years has been driven in large part by weakness in the four largest emerging economies, the BRICs. Much of this weakness has, in turn, been caused by structural problems that will only be overcome by a …
13th June 2014
We do not think the recent outperformance of Russia’s financial markets and currency will last. Indeed, the ruble has already dropped back slightly over the past week or so. There are three key reasons. First, ongoing conflict in Ukraine suggests that the …
11th June 2014
Emerging Market (EM) export growth picked up a little in April and the rebound in Chinese exports last month suggests that it has since strengthened further. In aggregate, EM export growth is still sluggish by past standards. However, there is a growing …
9th June 2014
Foreign exchange reserve accumulation by emerging markets has been cited by some as a reason whybond yields in the developed world have fallen in recent months and by others as evidence that the morevulnerable EMs are rebuilding external buffers following …
6th June 2014
May’s PMI data suggest that EM manufacturing strengthened a little last month, having softened for most of the past half a year. There was a welcome improvement in the PMIs of the BRICs, particularly China. In contrast, much of the weakness of …
3rd June 2014
After a choppy 2013, financial markets have turned optimistic over the outlook for EMs in recent months. In many ways this makes sense. We were always of the view that last year’s concerns that Fed tapering – and ultimately tightening – might trigger an …
2nd June 2014
Growth in the emerging world as a whole was steady at around 4.5% y/y over the first few months of the year, but there are several bright spots. Growth has picked up in some of the more open, manufacturing oriented EMs such as Mexico and Central Europe. …
29th May 2014
A year on from the start of the so-called “taper tantrum”, in which concerns about the withdrawal of monetary stimulus by the Fed sent shock waves through EM financial markets, the vulnerabilities that put several EMs in the spotlight remain. As a result, …
19th May 2014
Having shown signs of picking up towards the end of last year, growth across the emerging world seems to have slowed once again in recent months. The latest slowdown has been due to several factors, some of which are likely to be short-lived. In …
16th May 2014
