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  • Emerging Markets Debt Daily

    IMF Meetings Optimistic on Emerging Markets

    Natalia Gurushina ,Economist, Emerging Markets Fixed Income
    April 11, 2019

    There is a lot of optimism on emerging markets at the International Monetary Fund (IMF) Spring Meetings. An uptick in China’s inflation is unlikely to change the monetary policy stance.

    We are at the IMF Spring Meetings this week and happy to report that attendance is very high, with a lot of optimism on emerging markets asset prices, the resolution of the U.S.-China current trade dispute, and U.S. economic growth. China is a main focal point, with positive near-term growth expectations linked to re-leveraging. There are, however, lingering concerns about China’s longer-term fragility, both as regards growth and trade. Investors are universally negative on Argentina’s outlook, but the IMF points to the spectacular fiscal adjustment (up to date) and the outlook for future reforms.

    A sharp uptick in China’s yearly headline inflation (from 1.5% to 2.3% in March) is unlikely to change the central bank’s policy stance. The increase was mainly due to higher food prices (pork and vegetables), whereas core inflation remained subdued at 1.8% year-on-year. Further, the recent cut in the value-added tax rate should minimize inflation pressures going forward. Another piece of good news is that China’s producer prices accelerated slightly in March (to 0.4% year-on-year), easing concerns about downside pressures on the nominal gross domestic product (GDP) growth (and upside pressures on debt/GDP ratios).

    Turkish assets are still under pressure this morning as the market remains unconvinced that the government’s latest “salvation” plan will work. On the brighter side, February’s smaller than expected current accountgap (USD0.72B) shows that external adjustment is still under way. As would be expected, adjustment reflects mostly lower imports (which equals weaker domestic activity), whereas exports’ growth remains subdued. Looking forward, the main near-term risk comes from the pre-election spending binge.


    1Current account is a record of a country’s transactions with the rest of the world, based on its net trade in goods and services, net earnings on cross-border investments, and net transfer payments.


    PMI – Purchasing Managers’ Index: economic indicators derived from monthly surveys of private sector companies; ISM – Institute for Supply Management PMI: ISM releases an index based on more than 400 purchasing and supply managers surveys; both in the manufacturing and non-manufacturing industries; CPI – Consumer Price Index: an index of the variation in prices paid by typical consumers for retail goods and other items; PPI – Producer Price Index: a family of indexes that measures the average change in selling prices received by domestic producers of goods and services over time; PCE inflation – Personal Consumption Expenditures Price Index: one measure of U.S. inflation, tracking the change in prices of goods and services purchased by consumers throughout the economy; MSCI – Morgan Stanley Capital International: an American provider of equity, fixed income, hedge fund stock market indexes, and equity portfolio analysis tools; VIX – CBOE Volatility Index: an index created by the Chicago Board Options Exchange (CBOE), which shows the market's expectation of 30-day volatility. It is constructed using the implied volatilities on S&P 500 index options.; GBI-EM – JP Morgan’s Government Bond Index – Emerging Markets: comprehensive emerging market debt benchmarks that track local currency bonds issued by Emerging market governments.; EMBI – JP Morgan’s Emerging Market Bond Index: JP Morgan's index of dollar-denominated sovereign bonds issued by a selection of emerging market countries; EMBIG - JP Morgan’s Emerging Market Bond Index Global: tracks total returns for traded external debt instruments in emerging markets.

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