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The latest crisis engulfing Turkey will make it harder for the country to roll over its external debts, with the banking sector particularly vulnerable. If Turkey’s crisis worsens, it may cause wobbles in a few EM currencies, but there are reasons to …
22nd March 2021
The recent rise in EM sovereign bond yields will, if sustained, make public debt problems in some countries even worse. Those with large local currency debts may ultimately turn to financial repression policies, which might improve debt dynamics but at …
18th March 2021
EM financial markets have been hit this month by the rise in US Treasury yields, which has re-ignited some concerns about a re-run of the Taper Tantrum. So far, capital outflows from EMs have been relatively small. And financial conditions across the …
16th March 2021
Portfolio outflows from several EMs have intensified over recent weeks as fears over a re-run of the “Taper Tantrum” appear to be playing on investors’ minds. But outflows are currently much smaller than they were in 2013 and, even if there were a …
15th March 2021
Recent currency falls and rises in inflation have all but guaranteed interest rate hikes in Turkey and Brazil next week, and Russia’s central bank is likely to lay the groundwork for tightening too. More broadly however, low inflation and still-large …
11th March 2021
The rise in US Treasury yields poses a risk for those EMs with large external financing needs such as Turkey as well as some smaller frontier markets, and could force central banks in these countries to tighten monetary policy. The accompanying rise in EM …
10th March 2021
While further market turmoil is a risk over the coming quarters, the likelihood of outright banking, sovereign debt and currency crises among the large EMs is low. More acute vulnerabilities lie in some of the smaller frontier markets. Regular readers …
5th March 2021
A fresh allocation of IMF Special Drawing Rights (SDRs), if implemented, would provide a welcome boost to the depleted foreign exchange reserves of some distressed frontier economies. But an allocation wouldn’t address underlying dire debt dynamics, …
3rd March 2021
February’s manufacturing PMIs released across the emerging world were the proverbial mixed bag but, taken together, generally point towards solid EM industrial production growth in the next month or two. There are signs under the hood of supply …
1st March 2021
A global shortage of semiconductors is disrupting auto production, and – among EMs – it could hit exports from Central Europe and Mexico in particular. But some of the lost revenue should be made up once shortages ease. Meanwhile, strong semiconductor …
26th February 2021
Despite the rise in EM bond yields over the past week, EM financial conditions remain very loose. Most central banks are likely to look through the accompanying sell-off in currencies (indeed, some may welcome weaker exchange rates). But these moves do …
President Biden’s fiscal plan would support the US economy but the positive spillovers to emerging markets via trade are likely to be surprisingly limited. We doubt the Fed would move more quickly to reduce stimulus in response, and external financing …
25th February 2021
The outlook for emerging markets has improved in recent weeks, but we still expect a relatively slow and bumpy economic recovery over the next 12-18 months. The raft of Q4 GDP data released so far have been encouraging . Despite tighter social distancing …
24th February 2021
We still expect emerging market (EM) “risky” assets and currencies to make further gains this year, despite growing concerns about another “taper tantrum”. EM assets and currencies have made significant gains since their troughs last year. And we think …
23rd February 2021
While the mood in EM financial markets has soured a little of late, from an economic standpoint, the past month has brought several positive developments. First, Q4 GDP data released so far have generally been better than expected. Recoveries have been …
Israel’s rapid vaccination programme has allowed the government to set out plans to re-open the domestic economy in the coming weeks and may offer some lessons for other countries. The speed at which the restrictions will be lifted is the most striking …
19th February 2021
Taken alone, prolonged restrictions on international travel would do little to hinder the global recovery since overseas tourism is a small share of world GDP and some of the lost spending would be made up. But the aggregate masks a wide range of effects. …
18th February 2021
The latest rise in the price of oil – and our view that it will increase further this year – could push current account and budget balances into surplus in many of the EM producers. It should ease any concerns about dollar pegs in the Gulf, although we …
17th February 2021
We do not expect a re-run of the 2013 “taper tantrum”, in which EM assets went into a tailspin and some EM central banks were forced to hike policy rates. But even if there were a similar period of turmoil, the fallout for EMs would be less severe. The …
16th February 2021
The recovery in many emerging markets after the Global Financial Crisis was characterised by concerns about destabilising capital inflows, overheating, and asset price bubbles. This recovery is likely to be more gradual, external imbalances are unlikely …
12th February 2021
Net portfolio inflows into many emerging markets reached multi-year highs towards the end of 2020, which allowed a handful of central banks to lean against the wind and accumulate FX reserves. That said, early data suggest that net portfolio inflows have …
10th February 2021
The rise in global agricultural prices in recent months has sparked concerns about a surge in food inflation across the emerging world but we think that these fears are overdone. In any case, most central banks would probably look through higher food …
5th February 2021
The announcement of FX purchase programmes by several EM central banks has evoked comparisons with the “currency wars” that followed the Global Financial Crisis. One lesson from this period is that FX intervention is unlikely to prevent further currency …
4th February 2021
Manufacturing PMIs from emerging markets generally rose last month, underscoring that industrial sectors should continue to weather renewed outbreaks and restrictions in the coming months. But China’s manufacturing PMIs fell, providing further evidence …
1st February 2021
While we expect a swift recovery in developed economies over the course of this year, we doubt that this will come alongside a boom in EM goods exports. Instead, as global consumption patterns start to normalise, the key story over the next year or so …
29th January 2021
High COVID-19 cases across parts of the emerging world have grabbed headlines over the past few months. But while these outbreaks will inevitably create bumpiness in the affected countries’ economic recoveries, large downturns should be avoided. The …
28th January 2021
Table of Key Forecasts Overview – China’s recovery is already in full swing, and economies elsewhere in Asia and in Emerging Europe will recover lost ground relatively quickly over the next year. But slow vaccine roll-out and austerity in some cases mean …
27th January 2021
The roll-out of COVID-19 vaccines is getting underway across EMs, but in many cases progress has been slow-going . In the meantime, many countries are suffering from worsening outbreaks. New cases are high and/or rising across Latin America (see Chart 1), …
22nd January 2021
The main risks to the outlook for emerging markets this year relate to virus developments and vaccine rollout. (See here and here .) The more traditional macro risks are smaller, but one going under the radar in a few large EMs is that fiscal support …
21st January 2021
The speed at which vaccines can be rolled out will be a key determinant of economic performance this year, and this is likely to differ widely across EMs. This Update sets out a provisional framework for thinking about this process and when it will allow …
19th January 2021
High-frequency data show that the surge in net inflows to EM bond and equity markets seen last month is now easing, but inflows remain strong. We think that will remain the case as global risk appetite continues to improve. The data provide signs that the …
15th January 2021
In this Update , we take a look at the key elections that are scheduled across the emerging world over the coming year and outline their implications for economic policy and growth . Table 1 gives a summary of the major elections taking place across the …
13th January 2021
The risks to vaccination programmes fall into three groups: procurement, deployment, and effectiveness. In the coming few months, deployment issues will be a key limiting factor in most countries. These should be overcome relatively quickly in DMs, but …
8th January 2021
While the EM manufacturing PMI declined last month, largely reflecting a fall in China’s index, the overall message is that EM industry held up well at the end of last year. The sector is likely to fare well in 2021 provided that the rollout of vaccines …
4th January 2021
The latest activity data continue to show a divergence across countries, but also sectors. Consumers have generally driven recoveries in parts of Latin America, while manufacturing has been the main area of strength in much of Emerging Asia and Emerging …
21st December 2020
Positive vaccine news has not changed our view that monetary policy in many emerging markets (EMs) will generally remain loose for some time yet. That is a key reason why we still expect EM local currency government bonds yields to stay low by historical …
18th December 2020
Net portfolio inflows into EMs have been close to multi-year highs this month, and that appears to have come alongside an uptick in sovereign Eurobond issuance in recent weeks. Even so, debt issuance hasn’t been abnormally large. And it has been skewed …
17th December 2020
Frontier economies will receive only a relatively small direct economic boost from the roll-out of vaccines next year. But the indirect benefits via higher commodity prices, capital inflows and tourism spending will be more substantial. These indirect …
15th December 2020
One striking observation from the latest EM goods trade data is that exports have continued to rebound faster than imports, causing trade positions to improve further. While some of these gains may endure, various factors that have boosted EM trade …
11th December 2020
The race to secure and approve COVID-19 vaccines is in full swing and, while roll-out will generally be slower in EMs than in DMs, immunisation of vulnerable populations over the next year or so is a realistic goal, which should allow lockdowns to be …
10th December 2020
Positive vaccine developments have diminished, but not dispelled, financial risks in emerging markets. Brazil and South Africa are still facing slow-burning fiscal crises, while India’s banking sector looks worryingly frail. Elsewhere, despite the recent …
3rd December 2020
November’s headline manufacturing PMIs were generally encouraging and suggest that EM industrial sectors are faring well, even in Central & Eastern Europe where overall GDP will slump in Q4. We expect industrial sectors to continue to lead the EM recovery …
1st December 2020
This Focus sets out a framework for thinking about how the distribution of COVID-19 vaccines will affect the outlook for EMs. For much of Emerging Europe and Chile, these developments may allow economies to return to normal more quickly than we had …
30th November 2020
The latest activity and mobility data are consistent with economies in Latin America, India and South Africa registering another quarter of positive growth in Q4, and those in Central & Eastern Europe (CEE) suffering renewed contractions. But we still …
27th November 2020
Equities and bonds in emerging markets (EMs) rallied sharply on the vaccine news earlier this month, particularly outside of Asia. We think they will continue to fare well as the global economy recovers. The reaction of EM assets to the vaccine news …
The US election outcome and positive vaccine news has triggered a jump in EM net portfolio inflows to their highest level since 2014. These inflows are likely to remain robust over the coming quarters. Our total EM Capital Flows Tracker is constructed …
24th November 2020
Zambia became the first African government to default during the current crisis and debt risks are high in several other Frontier Markets, including Ghana and Kenya. The G20’s recently-announced ‘Common Framework’ to provide debt relief is a step in the …
23rd November 2020
This month’s positive vaccine news has dramatically improved the near term global economic outlook, but it doesn’t fundamentally alter our dovish view on EM monetary policy. Many EMs have only small (or non-existent) purchase agreements and face …
20th November 2020
Climate change will be more costly to EMs than developed countries, with parts of Africa, as well as South and South East Asia most vulnerable to rising global temperatures. That said, some EMs could benefit as investments to mitigate climate change …
19th November 2020
Relatively few EMs have signed large-scale advance purchase arrangements with pharmaceutical companies and the roll-out of vaccines is, in large part, likely to be slower than in DMs. This Update answers five questions on vaccine distribution in EMs and …
18th November 2020
