We recently returned from a research trip to South Africa where we met policymakers, analysts, rating agencies, and local asset managers. This note summarizes our key takeaways from the trip. 

Nationwide protests continue, triggered by dissatisfaction with the Al-Bashir regime. Sudan has contended for years with FX shortages and high inflation. Restoring confidence will require new leadership with the credibility and will to implement reform, and we expect a transition to take place. 

The IIF released a collection of papers analyzing the state of the Chinese economy. This research coincides with the IIF’s 2019 China Roundtable, held on the margins of the IMF/World Bank Spring Meetings. 

EM Growth Tracker at 3.2% 3m/3m sa ar in March. Business surveys suggest a moderate recovery ahead. Financial variables and hard data support the uptick. EM Europe & Africa trackers with important gains.

We assess EM current accounts systematically, through the lens of our BoP Nowcast framework. Deficits in Turkey and Argentina will shrink, but Turkey’s financing needs will remain high. South Africa will have the largest deficit in EM. Reserve levels are comfortable in most countries, but buffers are limited in Turkey and South Africa.

Debt vulnerabilities in low-income countries once again are becoming a source of concern, with total external debt and government indebtedness reaching their highest levels since 2005  

Surprisingly,  EM currencies have been quite a mixed bag, and our high frequency tracking of flows shows a mixed rebound in Q1. We believe the underlying issue is that investors are over-positioned, with a positioning overhang after a decade of loose G-3 monetary policy. We upgrade our capital flows projection to EM only modestly, with non-resident flows of $1,260 bn in 2019, after $1,135 bn in 2018.