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GMV: The Constructive Case for Global Growth and Risk Assets

Markets have been anxious about the global growth outlook for some time, with weak manufacturing data interacting with trade tensions to dim sentiment. Amid the gloom, we detect early signs that manufacturing may have troughed, and that adverse spillover to investment, important for future growth, is limited. Combining this growth picture with material easing from key central banks, paints a relatively constructive backdrop for risk assets, including EM FX.

Macro Notes: Nigeria - Relying on Costly Short-Term Inflows

Nigeria is increasingly reliant on expensive “hot money” flows. Non-residents are flocking to central bank auctions of CBN bills. Nigeria leads the region in Eurobond issuance, at a high cost. With non-oil revenue below 4% of GDP, risk of crowding out is high. Weak oil production and low prices weigh on the current account.

Oil Market Shock: Reminder of Regional Tensions

Recent attacks on Saudi oil facilities led to the worst supply disruption in last 50 years. Aramco’s full return to normal crude oil production may take more than a few weeks. The impact on the Saudi economy includes a small contraction in overall real GDP and a wider fiscal deficit.

Economic Views: External Financing Risk in Colombia

Colombia’s current account deficit is still widening, despite depreciation since the oil price shock of 2014-15. High FDI mitigates financing risk to some extent, but external funding needs are high relative to reserves. Foreign bond holdings rose fast compared to GDP, but aren’t unusually high relative to bond index weights.

Letter on EU Sustainable Finance Taxonomy to the EC TEG

The IIF provides high-level comments on the European Commission’s Technical Expert Group (TEG) report on an EU Taxonomy for sustainable finance. 

United Arab Emirates: A New Growth Model Is Needed

Promoting nonhydrocarbon growth and diversifying away from traditional sectors remain key challenges. We expect nonhydrocarbon growth to reach 1.9% in 2019 and 2.2% in 2020, aided by stimulus in Abu Dhabi and Expo 2020-linked spending in Dubai, but then recede. More emphasis on innovation is vital. 

Weekly Insight: A Farewell Bazooka

ECB responds decisively to “protracted” Euro Area weakness—but will it prolong September’s risk rally?; Persistent trade tensions put a spotlight on aggregate financing needs in emerging markets; At close to 90% of GDP, Argentina’s government debt is well above the EM average of 50%; over half is now owned by foreigners; Boom in “sustainable debt” issuance—green is the new gold!

Sustainable Finance in Focus: Green Is The New Gold

Sustainable debt issuance is on track to reach a record high of $350 billion in 2019—up over 30% from 2018. Non-financial corporates are increasingly active in green bond markets

Global Macro Views: Retail Employment and the US Labor Market

Job losses in the retail sector have been a persistent feature of the US labor market. This downsizing has so far only offset falling market share o...

Macro Notes: Interest in Russia Remains Despite Sanctions

Portfolio flows to Russia are weakly correlated with global flows, likely due to sanctions. Despite the risk of further sanctions, government debt remains attractive to investors, as Russia stands out among EM due to exceptionally low macroeconomic vulnerabilities. In the long run, sanctions can lead to less prudent policies and reduce growth prospects. We expect discussions of Russia sanctions in the US Congress to pick up again in the fall.

 

 

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