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Emerging Markets

Emerging Markets Economics Update

EM inflation nearing its peak

Aggregate EM inflation came in at its highest rate since 2008 last month, but there are signs that it is starting to stabilise and it should fall back in the coming months. For central banks in Emerging Europe and Latin America that have already hiked interest rates aggressively and are becoming increasingly concerned about growth, this may provide some space to wind down their tightening cycles. Asia Drop-In (25th Aug.): What’s the economic impact of a weak yen? What does the latest China-Taiwan flare-up mean for decoupling? How ugly are conditions in China’s real estate sector? Join economists from across our Asia services for this regular briefing on the region’s big investment stories. Register now.  

17 August 2022

Emerging Markets Economics Update

Emerging Markets Capital Flows Monitor

Capital outflows from EMs have eased over the past month, helping to stabilise local asset prices. But we think outflows will pick up again before long. That’s a threat to those EMs whose current account deficits have widened or are widening sharply, including Turkey, Chile and parts of Central Europe. Emerging Europe Drop-In (11th Aug): We’re expecting downturns in Central and Eastern Europe, but how bad could it get? Join this 20-minute briefing on our Q3 Outlook report, including the latest on Turkey, Russia and whether Hungary’s forint has further to fall. Register now.

10 August 2022

Emerging Markets Economics Update

End of the EM tightening cycle creeping closer

While DM central banks are currently raising interest rates in earnest, the past week has brought signs that tightening cycles are now nearing an end in parts of the emerging world. Indeed, with interest rates now well above neutral in much of Emerging Europe and Latin America, policymakers in most countries in these regions will probably ease off the brakes by October. Within Asia, low inflation has allowed policymakers to start tightening later and cycles will end later too, with rates at much lower levels.

8 August 2022

Our view

Weakness in China and spillovers from the war in Ukraine will slow the EM recovery and growth is likely to be weaker than most expect. Recession risks are rising in Emerging Europe in particular. On the flipside, commodity producers in the Gulf and parts of Latin America are likely to outperform this year. Elevated energy and food prices will keep EM inflation at multi-year highs throughout the year and policymakers in Latin America and Emerging Europe will raise interest rates by more than most expect.