The opposition candidate secured victory in the rerun of Istanbul’s mayoral election, but this is unlikely to result in a favourable shift in the direction of economic policymaking in Turkey as a whole. And major risks still lie ahead for the economy, …
24th June 2019
The immediate economic impact of the protests in Hong Kong will be very small. But continued erosion of Hong Kong’s autonomy, which is threatened by the proposed extradition law, would undermine a key foundation of its economic success. … What do the …
12th June 2019
We think the small scale of China’s planned tariff hikes reflects three factors – a desire not to escalate tensions, the limited scope for further tariffs and China’s ability to use other tools to punish US firms. … Three reasons for China’s modest …
14th May 2019
If it is introduced (which is far from certain) a tiered deposit rate would reduce the cost of negative interest rates for banks, but it would do so by only a trivial amount. Its main purpose would be to help to build support for, or buy off opposition …
29th March 2019
The key takeaway from today’s policy announcements at the opening of the National People’s Congress is that the leadership are still trying to balance efforts to support growth with concerns about financial risks. Officials pledged some moderate policy …
5th March 2019
China looks likely to introduce only about half as much fiscal and monetary stimulus in response to the current downturn as it did in 2015/16. Any rebound in growth will be much more tepid as a result. The boost for countries that export to China will be …
6th February 2019
The finance ministry made a clear bid in the interim budget today to shore up popular support ahead of the general election with proposals to boost rural incomes and cut income tax. But it is also hoping to demonstrate its commitment to fiscal prudence by …
1st February 2019
In advanced economies, monetary and credit conditions remain supportive. But bond issuance has been declining sharply in recent months, and credit growth in China is still slowing. … Monetary Indicators Monitor …
The decision by the US to impose sanctions on Venezuela’s state-owned oil company, PDVSA, will lead to a large loss of export earnings in the next few months. If Maduro can cling on to power during this time (perhaps by securing loans from China and …
29th January 2019
The finance ministry will be keen to include some election sweeteners in the interim budget that is due on 1st February. But it will also want to demonstrate fiscal rectitude. The most likely outcome is that the deficit target for FY18/19 is revised up …
24th January 2019
With interest rates likely to be structurally lower in the future, prime property yields are unlikely to return to historical levels. As such, we have re-weighted our valuation scores to exclude the comparison with the long-term average property yield. …
9th January 2019
The trade war has so far resulted in a much sharper slowdown in China’s imports from the US than its exports to the US. But exports will weaken soon unless existing tariffs are rolled back. As things stand, the US has imposed tariffs of 25% on $50bn of …
28th November 2018
The new trade deal agreed with Canada and Mexico won’t in itself have much impact on the US economy. Along with the deal recently agreed with South Korea, however, it provides another example of President Donald Trump backing down from his hard-line …
1st October 2018
EM inflation increased to its highest level in more than a year and a half in August, and we think that this has further to run over the coming months. One consequence is that the monetary policy in much of the emerging world is likely to tighten. … EM …
28th September 2018
With a further $200bn of US tariffs now confirmed, and China reiterating that it will retaliate with tariffs of its own, we take stock in this short note of where China stands in the trade war. … Taking stock of the new …
18th September 2018
In previous EM currency crises, real interest rates have increased (on average) by around 10.5%-11.0%-pts in the following year and remained more than 6.5%-pts above pre-crisis levels over the subsequent two years. In Argentina, real interest rates are …
13th September 2018
In the three years after a currency crisis, EMs almost always experience a collapse in imports, but the performance of exports is more mixed. Argentina looks similar to those economies that have seen little impact on exports. Turkey’s large manufacturing …
12th September 2018
The extent of the falls in EM currencies seen since April have generally been closely correlated with the degree of countries’ external vulnerabilities. On almost all measures, Turkey and Argentina stand out. Arguably, the Brazilian real has fallen …
24th August 2018
Both Turkey and Argentina have now suffered currency crises this year. In previous EM currency crises, economies experienced a sharp slowdown in GDP growth, averaging 5-6%-pts, and a rise in inflation, averaging 4-5%-pts, in the following couple of years. …
16th August 2018
China has more to lose economically from a trade war than the US. But the damage as the Trump administration expands tariffs will be mitigated by China’s high market share in many of the targeted products, which will push a portion of the cost onto US …
12th July 2018
President Trump’s threat to retaliate to EU tariffs with a 20% tax on EU car exports sounds alarming. In fact, the direct effect on the euro-zone would be smaller than you might think, perhaps reducing GDP by 0.1%. But the threat points to a rising risk …
26th June 2018
If President Trump follows through on his threat to expand further the range of Chinese goods subjectto punitive tariffs, China is likely to respond quickly by targeting US firms operating in China. This couldbe highly damaging for many of those companies …
19th June 2018
China has reportedly fleshed out its offer to boost imports from the US. In return, the US is working on a deal to allow ZTE to resume operations and may call off the planned tariffs on Chinese goods. None of this will do much to narrow the bilateral …
6th June 2018
The direct effect of Mexico’s new tariffs on imports from the US will be moderate. But the move will make the process of renegotiating Nafta even more difficult. The peso has fallen sharply in response and, if it falls further over the coming days, …
5th June 2018
The State Council is reportedly mulling the removal of all remaining limits on the number of children that Chinese families can have. But the small impact of past steps to dismantle the one-child policy suggests that policymakers would need to take a much …
22nd May 2018
In March, broad money growth slowed a bit in the euro-zone, UK and Japan. Indeed, in the euro-zone it dropped to its slowest rate since the ECB started its Asset Purchase Programme in early 2015. However, in all of these cases, the pace of money growth is …
11th May 2018
NB. Please download the attached pdf for the full publication with charts. Dire predictions for US shopping centre closures appear relatively well-founded. However, for a variety of reasons – including more defensive lease terms, lower stock per capita …
3rd May 2018
Financial risks remain low in the emerging world. However, since our last Financial Risks Monitor, currency vulnerabilities have increased in a handful of countries. … Currency vulnerabilities building in a few …
16th April 2018
Growth of almost all monetary aggregates slowed in major advanced economies in February, but we are not worried for three reasons. First, money growth has only slowed a bit. Second, changes in money growth tend to lag, not lead, changes in real activity. …
4th April 2018
Korea looks to have emerged from the Korea-US free trade agreement (KORUS) re-negotiations unscathed, but rising trade tensions between the US and China remain a threat to its export sector. The future of KORUS had looked uncertain ever since Donald …
26th March 2018
The tariffs announced today will cause difficulties for some firms exporting from China but will have a barely perceptible impact on China’s wider economy . The key uncertainty now is whether President Trump sees the them as an end in themselves, or …
22nd March 2018
The Hong Kong dollar has weakened this week to historic lows, though remaining within the narrow confines of its currency peg. But this is the result of ample domestic liquidity which has kept local interest rates low as those abroad have risen, and isn’t …
8th March 2018
Japanese officials have good reasons to take the imposition of US tariffs on steel and aluminium in their stride. The US would have to target a more important industry to provoke Japan to retaliate. The car industry is arguably the red line. The European …
7th March 2018
The direct macroeconomic effects of President Trump’s proposed tariffs on EU exports would be very small. However, if this signals the beginning of a bigger shift towards US protectionism, followed by sustained EU retaliation, the economic implications …
5th March 2018
China’s retention of an “about 6.5%” growth target for GDP in 2018, while expected, undermines the argument that growth is being demoted as a central policy concern. Growth is likely to slow we believe, not least because the finance ministry is today …
Saudi Arabia’s new bankruptcy law, which was approved by King Salman last month, will make it easier to deal with the fallout from corporate failures and, through improving access to credit, support the development of small and medium-sized enterprises …
1st March 2018
The removal of the two-term limit on China’s president is the clearest sign yet that Xi Jinping is reversing China’s reform era shift toward more institutionalised and rule-based politics. The quality of economic policy making is likely to suffer as a …
26th February 2018
The sell-off in financial markets, which was triggered by a reassessment of the outlook for US inflation and interest rates, has meant that government bond yields have jumped. But these recent moves are not yet a major cause for concern. Monetary …
15th February 2018
Monetary conditions should stay accommodative this year, even though the ECB has scaled back its asset purchases this month and the Fed will continue to gradually reduce its balance sheet. Bank lending is also likely to keep growing steadily. … Bank …
11th January 2018
Official talk about prioritising the “quality” of economic growth over speed has sparked speculation that the government may stop setting GDP targets. Unfortunately we think they are here to stay. GDP targets have been central to China’s economic policy …
22nd November 2017
The Party Congress kicked off today with the Report delivered by Xi Jinping. His ability to emphasise his contributions to Communist Party doctrine over those his predecessors hints at a successful consolidation of power. However, there were no signs in …
18th October 2017
Reform implementation is likely to accelerate after the Party Congress, particularly if President Xi emerges in a stronger position. But given Xi’s reluctance to relinquish state control over key parts of the economy, China’s structural problems are …
10th October 2017
With President Xi already firmly in charge of setting the government’s economic agenda, we don’t anticipate any major changes in policy goals after next month’s Party Congress. That said, a stronger Xi would be better placed to speed up the implementation …
13th September 2017
Anticipation is building ahead of next month’s Party Congress, which is widely seen as a potential watershed in policymaking if it results in President Xi successfully consolidating his power. The first evidence of how successfully he has been in …
7th September 2017
While other currencies have recently been rising against the US dollar, the Hong Kong dollar has been sliding to historic lows, albeit within the narrow confines of its currency peg. This is the result of ample domestic liquidity which has kept local …
24th August 2017
The value of China’s foreign exchange reserves fell by 10% in 2016 as the People’s Bank fought to prevent a disorderly decline in the renminbi. With the level of reserves still well above most estimates of what the PBOC needs to keep control of the …
9th January 2017
In the event of a trade war with the US, China’s response would go well beyond tariff increases. US companies would find their products and operations in China subject to tighter regulation that hampered their capacity to do business there. China’s …
17th November 2016
Despite the threat of being hit with high tariffs and being labelled a currency manipulator, China will see benefits in the election of Donald Trump. In the near term, the dollar’s weakness against other major currencies should ease pressure on the …
9th November 2016
China’s government has the resources to clean up the bad debts in its financial system. Even if the corporate sector were to default on a quarter of its debt and the government responded by bailing out the banks, total government debt would remain below …
19th May 2016
