Brazil approaches elections in a complex market situation, and suffering from long-standing fiscal vulnerabilities. We analyze the electoral outlook through the lens of fiscal risk. Vulnerability would remain high even under policy continuity. Unorthodox policies would result in sharply higher public debt. External shocks are less of a fiscal risk than domestic policies.
A distinction is often made between hot money and more stable capital flows. We examine which non-resident capital flows to EM look most like hot money by ranking how much different kinds of flows move with the exchange rate. For China, we find that non-resident other investment flows are the hottest, while non-resident equity and debt portfolio flows are hottest for the rest of EM. We rank countries according to the balance of hot versus sticky capital flows. Brazil, Chile and Colombia look positive, India, Lebanon and South Africa less so.
Potential impact of tariffs makes companies more cautious on future earnings. Pressure for rate hikes—angst for many EM policymakers. Impact of U.S. tariffs on Chinese imports and Chinese tariffs on U.S. imports—double whammy for some. Lower liquidity in EM bond markets could mean more volatility ahead. Time to pay the piper—highlights from our new Global Debt Monitor
Global debt rose by over $8 trillion in Q1 2018 to over $247 trillion (318% of GDP). We highlight risks for borrowers reliant on variable-rate debt, as well as higher USD funding costs for EM and other non-U.S. borrowers.
