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We have previously identified six emerging markets where credit growth appears to be unsustainable: Brazil, China, Hong Kong, Singapore, Thailand and Turkey. In the event of a crisis, past experience suggests that the authorities would have to tighten …
9th December 2013
The shift in China's growth model that has been signalled by its leadership would benefit many economies elsewhere in the emerging world while causing difficulties for others. Major commodity producers, particularly South Africa, Chile, and Brazil, are …
6th December 2013
Each of the five countries that were the worst hit by the summer currency sell-off (the so-called “Fragile Five”) are due to hold important elections next year. In the short term, uncertainty ahead of the elections is likely to weigh on sentiment towards …
4th December 2013
Manufacturing in the emerging world remains on course for a fairly strong final quarter of the year. Our EM-wide manufacturing PMI, based on data produced by Markit, is consistent with industrial output growth accelerating to around 6% y/y from 4% y/y in …
3rd December 2013
Our GDP Tracker suggests that although EM growth has probably picked up a little recently, it is too soon to talk about a meaningful rebound. Signs of recovery are strongest in Emerging Asia. Meanwhile, growth in Latin America and Emerging Europe remains …
28th November 2013
EM exporters appear to have benefited from the recent investment-led rebound in China. But with China's infrastructure spending now easing again and policymakers determined to rein in credit growth, investment looks set to slow. Further ahead, the …
22nd November 2013
EM currencies have resumed their rollercoaster ride over the past couple of weeks – first weakening on the back of renewed expectations that the Fed might start to taper its asset purchases by the end of the year and then rebounding following what were …
19th November 2013
Currency movements will continue to play a major part in determining emerging market (EM) monetary policy. Countries where currencies have weakened alongside large current account deficits - Brazil, India, Indonesia and Turkey - look set to maintain …
15th November 2013
We wouldn't read too much into the slowdown in EM export growth in September. The monthly data are volatile and there are already signs that exports rebounded in October. Nonetheless, EM export growth remains weak by historic standards and commodity …
14th November 2013
A raft of strong activity data from the US suggests that the recovery there is gaining momentum. We expect growth in the US to accelerate further over the coming quarters. The biggest beneficiaries in the EM world will be the more open economies in Latin …
12th November 2013
The small rise in most emerging market equities over the past month was eclipsed by the 4% or so rise in developed market equities. So far in 2013, emerging equity markets have underperformed developed markets by over 15%. This is a greater degree of …
We’ve voiced concern about the pace of credit growth in a number of EMs. Worryingly, the composition of banks’ funding appears to have deteriorated at the same time, most notably in Turkey, but also in Thailand and, to a lesser extent, in Brazil and in …
8th November 2013
Falling global food prices should keep food inflation subdued across much of the emerging world over the coming months. Emerging Europe and Latin America in particular are likely to see significant falls in food inflation. This should relax pressure on …
6th November 2013
Manufacturing across the emerging world appears to have made a strong start to Q4. Our EM-wide PMI estimate, based on data produced by Markit, is consistent with a pick-up in industrial production over the coming months, with most EM economies showing …
4th November 2013
Our GDP Tracker suggests that EM growth was probably unchanged from Q2 in the third quarter. Although there is evidence of a recovery in Emerging Asia, growth in Latin America probably slowed in Q3. Meanwhile, growth in Emerging Europe remains weak, due …
31st October 2013
Our view that the major BRIC emerging markets were heading for a period of permanently weaker growth looked bold when we set it out a little over a year ago, but it has now been adopted by the mainstream. Nonetheless, we think that, in several important …
30th October 2013
Consumer spending growth appears to have picked up in large parts of the emerging world over the past couple of quarters but Emerging Asia has bucked the trend and spending growth there has continued to slow. Looking ahead, consumer spending in the …
23rd October 2013
Having been spectators to the credit crisis that has gripped the developed world since 2008, debt problems now seem to be building in several major EMs. There are good reasons to think that the economic fallout may be less severe than in previous EM …
22nd October 2013
The currencies of the so-called “BIITS” (Brazil, India, Indonesia, Turkey and South Africa) have been singled out as being particularly vulnerable to a tightening of global monetary conditions. This is on account of their respective countries’ large …
21st October 2013
The past month has brought signs of stabilisation across the emerging world. EM financial markets largely shrugged off concerns over a possible US default and regained some of their lost ground following this summer's sell-off. Meanwhile, the recent …
17th October 2013
The IMF has downgraded its expectations for growth in the BRICS over the next couple of years, bringing its forecasts into line with our own. But while at face value the Fund expects growth to rebound further ahead, we think that weakness in the BRICS is …
15th October 2013
Emerging market currencies in all the major regions have generally risen against the dollar since this time last month. Those of countries in Emerging Europe have fared the best on average, although the strongest performer has actually been the Brazilian …
14th October 2013
The most recent Emerging Market (EM) trade data show that export growth maintained its upward trend in August. Forward-looking indicators point to further gains over the year ahead. … Continued recovery in EM …
11th October 2013
A default by the US government would be without precedent and the potential spillovers to emerging markets are unclear. Nonetheless, it seems likely that the same EMs that were hit during the summer sell-off that followed fears of Fed tapering would be …
10th October 2013
Financial markets have awakened to the vulnerabilities in the emerging world. These are real and will weigh on growth in the years ahead. But we believe that the doomsayers will be proved wrong – an imminent crisis in the emerging world is unlikely. … …
8th October 2013
Our EM-wide PMI suggests that the recovery in EM manufacturing continued at the end of Q3. However, the improvement is uneven. The rebound was most prominent in Emerging Europe, helped by the strengthening of key euro-zone trading partners. But in some of …
2nd October 2013
Suggestions that policymakers in troubled emerging markets (EM) now have a window of opportunity to reduce external vulnerabilities before the Fed begins to taper miss the point that these countries’ problems are largely structural. The reforms required …
27th September 2013
Despite recent talk of a “Great Deceleration” in the emerging world, our GDP Tracker suggests that EM growth has stabilised – albeit at a weak pace – over the past few months. … Talk of “Great Deceleration” overlooks recent …
26th September 2013
Financial markets across the emerging world have rallied in the wake of the Fed’s decision to delay QE tapering, easing concerns that several EMs were on the cusp of currency crises. As it happens, these fears were probably overdone. It’s worth noting …
20th September 2013
The Fed’s decision yesterday not to taper its asset purchases just yet provides some breathing room for the more troubled emerging economies. But their structural problems remain and uncertainty about the outlook for Fed policy has arguably now increased, …
19th September 2013
We expect the Fed to announce a small reduction in its asset purchases at the conclusion of today’s FOMC meeting. In this Update we revisit the implications for EMs and explain why, despite the market turbulence of recent months, the economic impact …
18th September 2013
The most recent Emerging Market (EM) trade data show that export growth accelerated in July. What’s more, on the basis of the latest leading indicators, a further improvement in EM exports looks probable in the coming months. … Signs of improvement in …
One of the more surprising features of August’s EM currency sell-off is how little policymakers in the worst-affected countries intervened in foreign exchange markets to try to stop it. In the case of Turkey, that probably reflects concerns that reserve …
17th September 2013
Returns from emerging market equities have been positive since this time last month. Moreover, emerging market equities appear to have stopped underperforming developed market equities. If this continues, it would restore the usual pattern whereby …
16th September 2013
In the five years since the collapse of Lehman Brothers, emerging economies have accounted for three-quarters of global growth. This has fed expectations that the emerging world can continue to comfortably outperform. In our view, while emerging economies …
13th September 2013
We do not expect the tapering and eventual ending of QE by the US Fed to be the trigger for a systemic Emerging Market (EM) crisis. Our Capital Economics Risk Indicator (CERI) suggests that financial risks in EMs are low, with only Venezuela in immediate …
12th September 2013
Our EM-wide PMI suggests that emerging market manufacturing improved a little last month. The recovery in the euro-zone in recent months appears to have boosted external demand, particularly in Central Europe and South Africa. But manufacturing in …
3rd September 2013
At an aggregate level, the second quarter GDP data suggest that the BRIC economies held up relatively well in Q2. However, this was largely due to a surprisingly strong rebound in Brazil. In the other BRIC countries, growth rates continued to slow towards …
2nd September 2013
Our GDP Tracker suggests that growth is no longer slowing across the emerging world, with the exception of Emerging Asia. But neither does it seem to be recovering. … EM growth remains …
28th August 2013
Improved fundamentals mean that currency crises pose a much smaller risk to Emerging Markets now than in the past. But it would be unwise to assume that the coast is therefore clear for the emerging world. … Should we still worry about EM currency …
26th August 2013
The renewed sell-off in EM currencies has cast a fresh spotlight on vulnerabilities in the emerging world. In this Update we answer three key questions that have been raised by recent market moves. … Three questions (and answers) about the EM currency …
20th August 2013
The past month has brought some hope that economic conditions in two of the four BRICs – Brazil and China – might be improving. In China, data on trade, industrial production and investment have all surprised on the upside. Meanwhile, Brazilian industry …
15th August 2013
Improvements in technology are making it increasingly easy to trade services. This has led some commentators to argue that services can become a more viable driver of EM growth, allowing EMs to break from the old path of industrialisation that was …
14th August 2013
Dollar-denominated emerging market government bonds have recovered some poise over the past month. This has been driven primarily by a decline in credit spreads, which have fallen significantly from their recent peaks. However, emerging market …
8th August 2013
There are some signs in the latest EM trade data that the slowdown in exports witnessed over the first half of this year has eased. Even so, export growth remains broadly flat in year-on-year terms in all regions of the emerging world. … EM trade …
High global energy prices have contributed to rising subsidy spending across much of the emerging world. Some EMs have already started to cut back on subsidies. But fears of inflation and civil unrest will see many act with caution. … EMs likely to …
6th August 2013
Our EM-wide PMI estimate suggests that conditions in emerging market manufacturing are now the weakest they have been since early 2009. … EM PMI falls to four-year …
2nd August 2013
Recent talk of a looming “Great Deceleration” in EM growth has tended to miss the crucial fact that the emerging world has already been slowing for several years. In this Update we summarise five key points that are central to the debate over the outlook …
1st August 2013
Our GDP Tracker suggests that after a sharp slowdown at the start of the year, EM growth ticked up in May. Evidence of a possible turnaround is strongest in Emerging Europe, and weakest in Emerging Asia. … Glimmers of …
26th July 2013
The sell-off in EM currencies that has followed the Fed’s signal that it may start to taper its asset purchases under QE3 has led central banks in India, Indonesia and now Turkey to hike interest rates. But these countries are probably exceptions within …
23rd July 2013
