Entries for 2021

Central banks project that the transition to net-zero emissions will be inflationary, especially over the course of the next decade; “Greenflation” could be even higher, as the need to rapidly scale up infrastructure investment may boost commodity prices; Climate hazards put upward pressure on food prices, while greening agriculture may trigger unfavorable food price dynamics; Projected global oil capex shortfall of $600bn to 2030: underinvestment could mean supply-demand imbalance, higher prices; Persistently insufficient green R&D means that non-carbon energy alternatives will remain expensive as uptake increases.

Nigeria’s exchange rate regime and FX shortages remain among the key issues. The Naira has come under renewed pressure in the parallel market in 2021Q3. We expect the CBN to undertake another step devaluation in the coming months. NDFs indicate that the currency could rise to NGN470/$ by the end of next year.

The November 2021 edition of the Insurance Update provides targeted updates on IIF insurance activities and events. 

China’s total foreign assets doubled in the past 11 years to $9 tln by mid-2021. However, considering the size of China’s GDP and the investments in its own assets in HK, China’s financial integration with the world still has a long way to go. 

The November 2021 Global Regulatory Update provides updates on current work streams. 

Inflation is rising due to higher food and energy prices, deglobalization, and supply chain disruptions. In addition, the recent increases in global CPI stem from widespread monetary easing and expansionary fiscal policy. Inflation may exceed central bank targets through 2022 and into 2023. 

Nuclear power has reduced carbon emissions by an estimated 60Gt over the past 50 years (nearly 2 years’ worth), but faces a potential decline in capacity by over two-thirds by 2040, as nuclear fleets age in mature markets. If no new nuclear capacity is built, this could add 4Gt of cumulative CO2 emissions by 2040—a step in the wrong direction.

Non-resident portfolio flows to local markets have recovered Covid-related losses. Looking at country allocations, important shifts have taken place in recent years. Foreign holdings are significantly lower in Brazil, Mexico, Poland, and Turkey, and higher in Egypt, Indonesia, Russia, and South Africa, due to policies and FX. Importantly, pressure on EM to defend their currencies has declined in recent years. However, EM are now more directly exposed via foreign investment in local bonds. And the synchronization of global inflation makes them vulnerable to DM inflation.