Filtered by Region: Emerging Markets Use setting Emerging Markets
The RBI’s decision to keep the repo rate on hold (at 6.50%) today comes as no surprise given the recent sharp drop in inflation. The central bank continues to strike a hawkish tone and the door remains ajar for further hikes. But with headline inflation …
8th June 2023
Optimism about a shift towards more orthodox economic policymaking in Turkey has taken hold following the appointment of Mehmet Simsek to the cabinet this weekend. Recent developments look encouraging but the next big test will be whether President …
5th June 2023
Saudi Arabia pushed through another oil production cut at the OPEC+ meeting, but, it will come at the cost of slower economic growth and we now think the economy will contract by 0.5% this year. The one crumb of comfort is that higher oil prices and loose …
The latest data suggest that Brazil’s labour market isn’t softening as quickly as we and many others (not least the central bank) had anticipated. That’s keeping wage growth high and, while that may help to support growth in Q2, it will probably deter …
1st June 2023
The manufacturing PMIs for May suggest that EM industry has, in aggregate, strengthened in Q2. Nonetheless, with the surveys pointing to further weakness in key DM trading partners, EM industry is likely to struggle in the second half of this year. The …
The re-election of President Erdogan has raised concerns about a possible sovereign default. We think this risk looks low for now, but it would become a bigger threat in the coming years if the current policy mix continues, macro imbalances worsen and …
Challenges to China’s long-run growth potential that were mounting a few years ago are now evident to all. We continue to expect trend growth to have fallen to around 2% in 2030. We held an online drop-in yesterday to discuss how our views on China’s …
26th May 2023
The South African Reserve Bank (SARB) hiked interest rates by 50bp, to 8.25%, today on the back of policymakers’ growing concerns about the inflationary impact of persistent power cuts. For now, we think that today’s move marks the end of the tightening …
25th May 2023
EM labour markets have shown relatively little sign of adjustment in response to the recent weakening of growth. That’s likely to keep wage growth uncomfortably strong in Central Europe and Latin America. In turn, we think this will limit the scale of …
24th May 2023
Hungary’s central bank (MNB) cut the interest rate on its one-day deposit tender at today’s meeting, from 18% to 17%, and this is likely to be followed by further cuts in the coming months, with the central bank’s key policy rates returning to single …
23rd May 2023
In a fracturing global economy, India stands out as a prime location for the “friend-shoring” of manufacturing supply chains out of China. The manufacturing powerhouses of Gujarat and Tamil Nadu are best-placed to benefit from this shift. But a handful of …
The Bank of Israel (BoI) delivered another 25bp interest rate hike, to 4.75%, at today’s meeting and did not offer any guidance as to whether this would be the last in the cycle. On balance, we think the central bank will deliver one more 25bp hike, to …
22nd May 2023
Emerging market equities have typically outperformed their developed market counterparts after US recessions. While we don’t foresee them replicating the sort of outperformance seen after the early-1990s or early-2000s recessions, we do think the MSCI …
19th May 2023
The Central Bank of Egypt (CBE) opted to leave interest rates unchanged at Thursday evening’s MPC meeting and the lack of comment on the pound will only add to investor concerns about the commitment to orthodoxy. Unless something changes soon, the path …
Over the past couple of weeks we have held a series of roundtable discussions with clients across Asia and North America on the outlook for EMs. In this Update we provide our thoughts on the recurring questions that we received, including on China’s …
Economies across Central and Eastern Europe (CEE) have significantly underperformed the euro-zone and the rest of the world in recent quarters, which has its roots in the scale of the inflation shock that the region suffered and the impact on domestic …
18th May 2023
Fears among investors have continued to grow that Egypt’s government will default on its debt in the coming years although, for now at least, there remains a path to avoid such an outcome. Taking that path will require the government to step back from …
Having picked up sharply in April, inflows into EM bond and equity markets have weakened in the past few weeks. Inflows into India and Turkey remained strong over the first half of the month, but in the latter this is likely to reverse after the …
16th May 2023
The sharp rise in unsecured bank lending has probably helped to support consumption and boosted bank profitability over recent quarters. But it also leaves the banking sector at risk of rising defaults, a concern that is exacerbated by the relatively low …
Turkey’s presidential election on Sunday was close, but Erdogan performed better than recent polls had suggested and he now has the edge ahead of a second round run-off on 28 th May. Hopes of an opposition victory and a return to orthodox policymaking …
15th May 2023
Sovereign debt risks are back in focus as some frontiers appear to be drifting closer to default. We remain most concerned about default risks in Tunisia and Pakistan, particularly in light of this week’s unrest and IMF deals now appear further away. Debt …
12th May 2023
The looming impeachment trial of Ecuador’s president Guillermo Lasso marks a further intensification of the country’s political crisis and suggests that the recent experiment with market-friendly governments is on borrowed time. There are lots of ways in …
10th May 2023
Most EM central banks have drawn their monetary tightening cycles to a close now and, if history is any guide, it looks like the conditions will be in place for an easing cycle to start from around July/August. EM central banks were quick off the mark to …
Note: We discussed Turkey’s election in an online briefing on 10th May. Watch it here . There’s a lot of optimism that the opposition will emerge victorious in Turkey’s elections, which would pave the way for a return to orthodox economic policy. Were …
Flash GDP figures showed that Saudi Arabia’s economy contracted in Q1 on the back of OPEC+-agreed oil output cuts, but growth in the non-oil economy remained strong. The “voluntary” oil production reductions announced last month will continue to weigh on …
9th May 2023
The manufacturing PMIs for April suggest that industrial activity softened in most EMs last month and that external demand generally remained weak. The one crumb of comfort is that price pressures eased further last month. The aggregate Emerging Market …
4th May 2023
The idea of a new BRICS currency to settle trade or hold in reserves instead of the dollar has been doing the rounds recently. This could be modelled on the IMF’s Special Drawing Rights. But getting India on board with China would be difficult. And if the …
The Czech central bank (CNB) left its main policy rate on hold at 7.00% as expected today, but it looks like policymakers set out to strengthen their hawkish rhetoric and downplay expectations of an imminent cut in interest rates. The message was loud and …
3rd May 2023
Note: We'll be discussing Turkey's election in an online briefing at 09:00 EDT/14:00 BST on 10th May . Register here . Parliamentary and presidential elections on 14 th May will make or break macroeconomic stability in Turkey. As things stand it looks …
Note: We’re holding a special 20-minute online briefing all about EM debt risks this Thursday at 10:00 EDT/15:00 BST . Register now . Egypt’s balance of payments (BoP) position strengthened markedly late last year, but policymakers’ reluctance to live up …
2nd May 2023
Inflows into EM bond and equity markets have picked up sharply in the past month, with flows into Asian equity markets looking particularly strong. That said, if we right that the dollar will rebound, we suspect that these inflows will drop back. That’s …
27th April 2023
The Hungarian central bank (MNB) slashed the upper end of its interest rate corridor today by 450bp, to 20.50% and, while this move alone won’t loosen monetary conditions, it is likely to be followed by cuts to the effective policy rate (the overnight …
25th April 2023
Large current account deficits across CEE have started to narrow in recent months and we think that this will continue as slowing economies and lower energy prices shrink import bills. This will reduce vulnerabilities, but external risks and currency …
20th April 2023
Our dataset on inflation expectations across EMs shows some encouraging falls recently and supports our view that, with EM inflation likely to fall further, monetary easing cycles will start in the coming months. However, inflation expectations remain …
19th April 2023
The increasingly diverse array of creditors to debt-distressed EM governments – and the difficulties in getting China and Western lenders to see eye to eye – is already gumming up sovereign debt restructurings. And despite some positive noises from the …
17th April 2023
The raft of EM CPI figures out this week show that headline inflation is, in aggregate, finally starting to fall significantly, and we expect it to decline further in the coming months. But core inflation is easing relatively slowly, and remains …
13th April 2023
We’re not convinced by the arguments currently doing the rounds that military spending in Russia artificially boosted GDP in a significant way last year. While military spending has increased further this year and manufacturing in military-oriented …
12th April 2023
The RBI’s decision to keep the repo rate on hold at 6.50% today belied the central bank’s recent hawkish communications. The door remains ajar for hikes in the future but with headline inflation set to fall back to within the RBI’s 2-6% target range …
6th April 2023
The widening in India’s current account deficit last year, to 2.4% of GDP, was not as significant as many had feared in the context of the surge in commodity prices. Looking ahead, we think the deficit will narrow over the coming quarters as domestic …
4th April 2023
Note: Join our 6 th April online briefing all about the risks to EMs from banking turmoil. Register now . The manufacturing PMIs for March made for pretty downbeat reading in most EMs and the outlook for the coming months remains lacklustre. One source of …
3rd April 2023
Israel’s central bank (BoI) raised its policy rate by a smaller 25bp, to 4.50%, as expected today and its communications sounded slightly less hawkish than at its previous meeting. Inflation pressures are likely to remain strong this year, but the door …
Note: We’ll be discussing the OPEC+ decision and answering your questions in an online briefing at 10:00 EDT/15:00 BST today . Register here . The surprise announcement of a further 1.66mn bpd cut to oil output by OPEC+ will reduce GDP growth mechanically …
Join our 6 th April online briefing all about the risks to EMs from banking turmoil. Register now . The broad message from the recent spate of EM central bank meetings is that policymakers are still focussed on reining in inflation even as the global …
31st March 2023
Even if the banking sector turmoil doesn’t grow into a broader economic crisis, we still think equities in emerging markets (EMs) will struggle over the next couple of quarters in local-currency (LC) terms. Since confidence in the financial sector started …
22nd March 2023
Turkey’s banking sector has been one of the weak links in the EM world in recent years due to its very high external debt burden. The good news is that banks have paid down these external debts and built up their FX liquidity buffers since 2018. This has …
Spillovers from the global banking crisis to EMs appear limited so far. Encouragingly, too, most EM banks appear to be well placed to weather a period of rising non-performing loans resulting from weaker growth and higher interest rates. That said, there …
21st March 2023
EMs, in general, don’t appear to have suffered large capital outflows over the past 10 days or so amid the turmoil in the global banking sector. But some countries with large current account deficits (Chile, Colombia, Hungary) have seen their currencies …
20th March 2023
A key channel through which emerging markets could be affected by the strains in the global banking sector is if lending by foreign banks falls sharply. On this front, EMs’ vulnerabilities have eased since the Global Financial Crisis. But there are still …
16th March 2023
At the time of writing, financial markets appear to be stabilising after the turmoil caused by the collapse of SVB. And it doesn’t look like EMs have suffered large capital outflows or strains in their banking sectors. If this relatively benign scenario …
14th March 2023
The South African rand has weakened sharply against the US dollar so far this year, markedly underperforming other emerging market (EM) currencies. We expect domestic and global headwinds to drive a bit more depreciation, to 19.0/$, later this year. But …
9th March 2023
