Entries for 'EM Vulnerability'
February 27, 2020
Last week we identified a building credit impulse in Turkey, ...
rivaling in size the Q1 2019 credit expansion ahead of elections.
There are sign...
February 20, 2020
A succession of credit expansions shaped Turkey’s macro picture in recent years.
The large credit expansion in 2017 boosted growth that year to very...
January 30, 2020
EM growth has failed to outpace that in advanced countries since 2013, ...
a prolonged growth slump we have been calling “secular stagnation” in EM....
January 23, 2020
Growth has slowed sharply across many emerging markets, ...
a phenomenon we have been calling “secular stagnation” in EM.
Driving this growth slo...
January 9, 2020
Our last piece of 2019 introduced the idea of “secular stagnation” in EM, ...
whereby growth is down sharply in recent years, driven by weak investm...
December 19, 2019
The term “secular stagnation” is typically used in the context of the US, ...
to describe subdued growth in the years following the global financial...
December 5, 2019
When recession fears were at their most elevated a few months ago, ...
we argued that weak manufacturing reflects mostly inventory overhangs, ...
September 26, 2019
The global outlook is in a horse race between weak manufacturing and solid services.
We show there is little spillover from weak manufacturing to th...
September 19, 2019
Markets have been anxious about the global growth outlook for some time, with weak manufacturing data interacting with trade tensions to dim sentiment. Amid the gloom, we detect early signs that manufacturing may have troughed, and that adverse spillover to investment, important for future growth, is limited. Combining this growth picture with material easing from key central banks, paints a relatively constructive backdrop for risk assets, including EM FX.
September 5, 2019
There is growing concern over disruption to global supply chains, given the now multiple rounds of tariffs in the US-China trade dispute. Despite all this, China’s current account and trade surplus look robust. This resilience is partly driven by a shift in the composition of exports away from the US and towards destinations like ASEAN and the Euro zone.
August 29, 2019
Mounting trade tensions are putting depreciation pressure on the RMB. We investigate contagion risk to the rest of EM from further RMB weakening. During the surprise RMB devaluation in august 2015, commodity currencies like the Russian Ruble and Colombian Peso were hit most, as markets traded weaker global growth and thus falling commodity prices. We see this as a good template for possible contagion effects now.
August 15, 2019
US tariffs should be imposing a strain on China’s balance of payments, most obviously in the current account. But the surplus is rising, in part due to quite healthy exports. Instead, trade tensions may be manifesting in capital outflows, which are above 2012 levels and half 2015/6 levels. Tariffs may be raising RMB depreciation expectations, an issue of great importance to China’s policy makers and the rest of EM.
August 8, 2019
US tariffs are exerting depreciation pressure on the RMB, which we think could ultimately drive $/CNY well above 7.00. One illustration of that depreciation pressure is a $/CNY rate now back in the upper (weaker) half of the band around the fix. Another visualization are large residuals in our fixing model, which point to policy makers keeping RMB temporarily strong.
July 18, 2019
Despite the shift in the Fed's stance, the Dollar has refused to fall versus the rest of the G10. One reason is that other central banks are also shifting dovish, which limits the scope for interest differentials. Another is that the importance of rate differentials as a driver of FX has fallen, such that the dovish Fed shift now carries less signal for the Dollar. The Dollar is “stuck,” a dilemma for policy makers who want a weaker currency.
June 20, 2019
Our global growth tracker has fallen to its lowest levels since 2015, driven by a sharp drop in manufacturing sentiment around the world. The evidence points to normal ups and downs in global manufacturing, with some early signs that hard-hit places like Germany are turning up.
April 25, 2019
We scan across EM for where – besides Turkey – growth is heavily credit dependent. Colombia, Russia, Indonesia, Brazil and Poland have growth heavily linked to credit.
April 18, 2019
The Fed has undertaken a remarkable dovish shift so far this year, which some believe has further to run given this year’s review of policy. From a global perspective, this dovish Fed shift is potentially destabilizing. If the Fed succeeds in running the economy hot, longer-term yields will rise, a downside risk to our already more cautious EM capital flow projections.
April 11, 2019
Last year’s sudden stop in the BoP gave rise to a severe credit crunch, cutting the current account deficit and reducing external vulnerability. But the credit expansion in Q1 of this year undid a lot of that progress. We see much of recent Lira weakness through this credit-focused lens. The way forward lies in shifting Turkey away from credit-led growth.
April 4, 2019
Another credit expansion has been underway during Q1 of this year, and again coincided with rising volatility in the $/TRY exchange rate. Volatile markets necessitate a shift away from credit-driven growth, to a new growth model with an emphasis on structural reforms.
January 10, 2019
We see global growth worries as overblown. US data are catching down with elsewhere, but that was inevitable and to be expected, a normal sign of global business cycle swings. We lower our growth forecasts modestly, but continue to see a solid overall picture.