Entries for 2022

Frontier LatAm countries stand to lose from the spillovers of the war in Ukraine. Fuel is a key driver of import demand in most countries; we estimate a $10 rise in oil prices yields negative trade effects in the range of 0.4% to 1.0% of GDP. El Salvador, Honduras, and Jamaica look most exposed.

The ongoing war in Ukraine clouds the outlook for Turkey’s external deficit. Foreign demand for Turkish goods and services will likely weaken markedly. Higher energy imports and smaller tourism revenues will also be detrimental. However, a weaker Lira should continue to constrain import volume growth. Lower GDP growth, now forecast to reach 2.2%, should also contribute to this. Risks are to the downside with a prolonged military conflict first among them.

Global sukuk issuance surged to a record $250 billion in 2021, up from $180 billion in 2020; Only $5 billion (2% of the total) was linked to environmental, social and governance (ESG) factors-still a niche market; Indonesia has the largest green sukuk market, followed by Malaysia and Saudi Arabia; A coherent, widely-accepted taxonomy and classification framework would support further ESG sukuk market development.

Sanctions on Russia following the invasion of Ukraine will lead to a deep output contraction. Soaring energy prices and supply chain disruptions are beginning to affect Europe’s economy. The resulting weaker foreign demand, including from the Euro area, will weigh on EM Europe. In addition, tighter liquidity conditions are likely to be a drag on domestic demand through ‘22. Over the medium term, EM Europe could benefit as investors are withdrawing FDI from Russia. The outlook is clouded by extraordinary uncertainty as the military conflict is likely to drag on.

As the Russia-Ukraine conflict continues to intensify, we have updated our EM scorecard to provide a snapshot of rela-tive vulnerabilities across 18 major emerging market economies, with a focus on debt and ESG concerns; Against the backdrop of heightened geopolitical tensions and rapidly rising borrowing costs, Turkey, Czech Republic, Hungary, and Poland appear particularly vulnerable to changes in global risk appetite; By our yardstick, the Philippines, Brazil, Indonesia, India, and Colombia look better insualted than many EM peers; On ESG metrics, South Africa, Indonesia, and the Philippines all face significant challenges, including on carbon effi-ciency, environmental protection, and a range of social issues.

Commodity export dependence across LatAm is high for EM. The commodity price surge due to war in Ukraine should bolster external accounts in several countries, as reliance on Europe as an export market has fallen. The hard currency windfall should help offset adverse effects on inflation and growth.

The March U.S. Regulatory Update covers Fed announcements on climate-related financial risk updates, ongoing SEC rule proposals, Hill hearings on crypto, and more.

Russia’s invasion of Ukraine has triggered a number of severe sanctions. China, an important partner, has maintained a deliberately neutral stance. While Russia-China trade is important, financial links remain minimal. China could mitigate Russia’s loss of access to global payment systems. Furthermore, with 40% of reserves frozen, holdings in China are critical. The Bank of Russia (CBR) may need to get creative with FX interventions.