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  • Emerging Markets Debt Daily

    Turkey Current Account – Still Picture Perfect

    Natalia Gurushina, Economist, Emerging Markets Fixed Income
    November 12, 2019
    Turkey posted another large current account surplus in September. Stronger than expected services support the recovery narrative in Brazil.

    Turkey’s current account balance looked picture-perfect in September. (Well, almost.)
     The country posted a larger than expected surplus of USD2.48B, even though domestic activity is clearly rebounding. The balance of payments’ details also show that domestic banks continued to deleverage, while local companies still have access to trade credit lines from abroad. The conventional wisdom is that the government’s pro-growth policies will boost imports at some point in 2020—we should get a better idea about the pace from September’s industrial production print on Thursday.

    Brazil’s recovery story got extra support this morning from stronger than expected services, which came on the heels of solid September retail sales and rebounding industrial production. Of course, we should never underestimate the government’s ability to spook the markets even when things are improving (last week’s botched pre-salt oil auction), but the bottom line is that Brazil’s growth outlook is finally getting better—albeit the continuation of the reform momentum will be key going forward.

    The Chilean peso took another big tumble this morning (down by 348bps as of 9:14am EDT, according to Bloomberg LP), as the market is pricing in the eventuality of a new constitution, which means that the uncertainty about the economic/governance framework will continue for months. Add to this the fact that the underlying social issues cannot be easily fixed, the need to price in significant fiscal expansion (and most likely higher inflation), heavy positioning before the protests, calls for a general strike and new barricades on the streets—and it’s hard to see a significant upside emerging any time soon. 

    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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