Posts Tagged ‘emerging markets’

Emerging markets outlook for 2017

November 25, 2016

Focus Economics has published its emerging markets prediction for 2017.

  1. Latin America | External shocks to undermine potential growth in the region
  2. Asia | Growth will benefit from rising global demand and resilient domestic dynamics
  3. MENA | Higher oil prices promise to boost growth in 2017
  4. Eastern Europe | Economic conditions set to improve in 2017
  5. Sub-Saharan Africa | Weak growth urges policy action
Focus Economics: Emerging Markets outlook 2017

Focus Economics: Emerging Markets outlook 2017

It is in Asia and a recovering Russia that there may be some drive:

Asia | Growth will benefit from rising global demand and resilient domestic dynamics

  • China’s still resilient economic growth and the ongoing reform momentum in India will prompt the East and South Asia (ESA) region to expand a strong 6.0% in 2017, which will represent a slight deceleration from the expected 6.1% increase in 2016. Meanwhile, in the Association of Southeast Asian Nations (ASEAN), an improvement in the region’s external sector should support quicker growth along with resilient household spending. ASEAN will expand 4.8% in 2017, up from 2016’s 4.6% increase.
  • Inflationary pressures are expected to strengthen across Asia next year as a result of a low base effect, the gradual increase in commodity prices and scheduled subsidy cuts and tax hikes in some economies. While inflation in ESA will increase mildly from 2.4% in 2016 to 2.5% next year, the pick-up in ASEAN will be more pronounced and inflation is expected to rise from 2.3% in 2016 to 3.2% in 2017.
  • While economic growth in the region will benefit from a mild improvement in global demand and resilient domestic dynamics, some clouds are gathering on the horizon. Donald Trump’s victory in the U.S. presidential elections could disrupt the global economy if he implements his proposed protectionist policies. This has the potential to hit growth in the region, given the importance of the external sector for most Asian economies. Also, a more aggressive monetary policy normalization by the U.S. Federal Reserve could heighten volatility in the financial and exchange rate markets in the region.


Eastern Europe | Economic conditions set to improve in 2017

  • The stabilization of commodities prices and the economic recovery in Russia, the region’s largest economy, should support a return to growth in the Commonwealth of Independent States (CIS) region next year. GDP is seen growing 1.5%, after falling 0.3% in 2016. However, geopolitical risks and monetary tightening in the U.S. are casting a shadow on the outlook.
  • In Central & Eastern Europe (CEE), steady domestic demand should fuel a healthy 3.0% growth this year and next. Meanwhile, dynamics in South-Eastern Europe (SEE) will be dominated by escalating political uncertainty and security concerns in Turkey and the ongoing debt saga in Greece. GDP in SEE is seen expanding 2.8% in 2017, slightly above the 2.7% projected for this year.
  • Price pressures in the CIS region should fall steadily throughout 2017, supported by a tightening bias by most central banks in the region, and our panel sees inflation at 5.6% in 2017. For CEE, inflation is expected to rise in 2017 as the effect of low oil prices wanes, with our analysts projecting average inflation of 1.5%. Meanwhile, SEE will see a slight increase in price pressures on the back of rising inflation in Greece and Romania.
  • External risks to the Eastern European economy are high heading into 2017. The surprise outcome of the U.S. presidential election along with tense Brexit negotiations will increase volatility in the financial markets and weigh on currencies and assets across the region. In addition, an expected increase in U.S. interest rates has the potential to tighten global liquidity and spark capital outflows. For Russia, however, Trump’s election is seen as positive and some analysts speculate that he could end sanctions against Russia due to his close ties with the country. 

Maybe the financial crisis which started in 2008 is finally coming to an end. Eight years is long enough.

I blame the EU and the lack of drive from Barack Obama, not for the start of the crisis, but for prolonging the length of time it has lasted. But one reaction for the political cowardice of the last 8 years (some would say 20 years) is the disenchantment with liberal/social democratic, politically correct, elite and  “establishment” politics.

The disenchantment is showing itself to be a global phenomenon.


A “dark gray” Monday for emerging market currencies

December 16, 2014

There is a gloom pervading global markets.  The gloom of the oil producers is not being offset by an optimism among the oil consumers. The Russians are feeling the effects of the sanctions. Chinese and Indian industrial growth – by their standards – are stagnant. Europe is stuck with its high energy price models and is not prepared – yet – to understand that price reductions by cost reductions (in real terms) is a good thing. The political leadership of the G8 or even the G20 are not – individually or jointly – communicating any convincing vision of a global economy and its recovery. The Middle East is in chaos and nobody has any clear notion of how order can be restored.

It was a dark grey – if not a completely black – Monday for emerging market currencies yesterday. The Indian Rupee slumped to a 13 month low. The Indonesian Rupiah hit a 16 year low. The Russian Ruble, Turkish Lira, Brazilian Real and South African Rand all hit new lows. There was no obvious single trigger but largely driven by sentiment and general gloom. The emerging markets are overly concerned about potential rate hikes in the US next year. But the real conflict lies in the mismatch between Japan and Europe planning rate cuts while the US plans rate hikes. A soaring Dollar is all very well and is fine for a while but it reduces the possibility of everybody else buying goods priced in Dollars.

One wonders why the G8 or the G20 counties bother with their summit meetings. Either the meetings are a particularly ineffective forum or the people attending are largely incompetent. I tend to think that without one or more showing real leadership, the G8 and G20 are just talking-shops and “whatever will be, will be”.

To get a turn-around and move upwards during a period of decline, it is necessary first to hit bottom. It seems to me that the bottom is near – unless we are again approaching a chasm where the bottom is not even visible.

Wall Street Journal:

Analysts say there was no specific catalyst for the selloff, but a number of factors converged to put downward pressure on emerging markets. Global oil prices continued to tumble, exacerbating problems for oil-exporting countries like Russia and Colombia. The Federal Reserve is also scheduled to issue a statement on Wednesday, which could signal that the central bank is closer to raising interest rates. That would deliver a blow to emerging markets that have benefited from years of easy money from the Fed. 

As investors scrambled to dump their risky assets, the selloff in emerging markets spread beyond oil exporters into countries like India and Indonesia, which had been relatively resilient in recent weeks.

“There’s just a lot going on in emerging markets, and investors are having some difficulty absorbing that information and figuring out what will happen next,” said Lucas Turton, chief investment officer of Windham Capital Management LLC in Boston, which manages $1.8 billion and cut back on its exposure to emerging-market stocks two months ago.

In afternoon trading in New York, the dollar was up 3.1% against the lira, with the Turkish currency trading at 2.3706 to the greenback. The real was off more than 1% at 2.6884 to the dollar, while the ruble plunged by more than 10% to trade recently at 65.615 to the dollar. ……

….. The Fed is expected to raise interest rates next year as the economy improves, while central banks in Europe and Japan are pursuing strategies to stimulate growth and inflation. This divergence has caused the dollar to soar against currencies around the world in recent months. ….

Many investors are bracing for turmoil in emerging markets as the dollar strengthens, making it more expensive for these countries to pay back international debt, and as U.S. growth beats much of the rest of the world. For instance, Indonesian companies have issued $11.4 billion of foreign-currency debt so far this year, according to Dealogic, putting them at risk for what analysts call a “currency mismatch.” This means these companies could struggle to pay off their dollar debts as their local currency, the rupiah, weakens in value against the greenback.

The WSJ ends on a very pessimistic note.

Stephen Jen, founding partner of hedge fund SLJ Macro Partners, said emerging-market currencies could “melt down” as investors accelerate their selling.

“Nothing the [emerging market] economies can do will stop these potential outflows, as long as the U.S. economy recovers,” Mr. Jen said.

My simplistic view is that market sentiment – gloom or optimism – is the most critical factor. And, I believe, that sentiment is a direct consequence of perceived vision and leadership. Obama has demonstrated that he is something of an analyst but he is no leader. Europe has no leader (apart from a reluctant Merkel) who communicates any clear vision of Europe or the world. In the absence of political leadership I am looking to industry and industry leaders – who I know exist – to provide the resilience to hold the fort and keep going till political leadership appears again.

The political leadership I am looking for is that person or persons who can provide vision and some real leadership for the G8 or the G20 groupings. No doubt it will come, but it could take some time. It has to, I think, come from the US or Europe. It is possible but unlikely to come from China or India or S. America for some time. Jeb Bush or Hilary Clinton or Elizabeth Warren are unlikely to provide such leadership. It could come from an unlikely source in Europe.

“Cometh the hour, cometh the person”, one hopes.

“Thank god for BP”:Louisiana fishermen net more cash working for BP

August 24, 2010

There is always a silver lining – for some.

The FT reports:

The white shrimp season officially began this week in Louisiana, and at this time of year 46-year-old Mr Foret, a hardened Cajun shrimper from Houma in the Mississippi delta, would normally be out on the water plying the trade that has kept him and his family since he was 13. But now that he is a BP contractor through the oil company’s Vessels of Opportunity programme, designed to employ local fishermen in the oil spill clean-up operations, he earns more consistent money, and works a lot less than he used to. “BP is a very nice fella, and this is a guaranteed cheque,” he says, pointing to a huge yellow skin or “bladder” on his boat that is used to collect skimmed oil. “I’m sticking with this for as long as I can.”

Captain Michael Owen, better known as the big “O”, has been doing pretty well out of BP. For the past three months, he and his 24-foot fishing boat have been ferrying clean-up workers to parts of the Gulf affected by the oil spill. As a BP contractor, he does not have to worry about securing charter fishing contracts for small parties of tourists visiting the Mississippi delta, the business he ran until the oil spill. Nor does he have to stress over the pressure to find fish – redfish and speckled trout – for his demanding clients. “I’m super happy with BP,” he says. “And I’m not taking a cut [in pay].”

“It takes you three days to make that charter fishing,” says a charter fisherman from Port Sulphur about 30 miles up the road. “Thank god for BP.”

Gulf Coast Fisherman

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