Expansionary fiscal policy will continue to drive non-oil growth, as fragile investment sentiment and regional tensions continue to hinder growth of the private non-oil sector. We expect overall growth to moderate to 2.0% in 2019, dragged down by compliance with the recent OPEC+ deal.
Our January 2019 US Financial Regulatory Update covers new reports released by the Federal Reserve on Financial Stability, and Supervision and Regulation; proposed adoption of SA-CCR for large banks; proposed regulations on GILTI Inclusion and BEAT Tax; the November 2018 U.S. General Election and other federal personnel updates, among other topics.
EM Growth Tracker at 3.4% 3m/3m sa ar in December. Decline driven by hard data and business sentiment. Trade volumes and industrial production weakening. All regional trackers slowing towards the end of 2018.
Jittery equity analysts cut forecasts for next year’s corporate earnings; Tighter financial conditions may prompt more central bank caution; Safe-haven flows intensify in early 2019 amid concerns about the credit cycle; Heightened volatility — notably in equity markets – dampens risk appetite
Slump in cyclical sectors highlights concerns about global growth, impact of quantitative tightening; Market selloff has prompted a sharp correction in equity valuations—but they still don’t look cheap; Signs of rotation to emerging markets; This will be the last Weekly Insight of 2018—see you in the New Year!
In this forerunner to deeper IIF analysis that will follow in 2019, we look at some potential scenarios where innovative disruption could have an asymmetric effect on banks’ balance sheets.
Lesson #1: Don’t engineer an outsize credit boom into a global tightening cycle. Lesson #2: Current account-based estimates of FX fair value are really important. Lesson #3: After a decade of G-3 monetary easing, EM has a positioning overhang. Lesson #4: Imposing a tariff on China is a negative shock that weakens the RMB. Lesson #5: Don’t get hung up on stories the Fed is shifting hawkish. It isn’t.
In our last edition of Sticky Notes in 2018, we look at President Xi's reform anniversary speech, Venezuela's future, NAFTA termination, oil markets, and a potential U.S. government shutdown.
On December 17, 2018 the IIF responded to the IAIS Application Paper on Proactive Supervision of Corporate Governance.
We have introduced a new measure of real money positioning in EM, which extends the IIF’s well-known work on capital flows to positioning. Our positioning data are calibrated to match stock positions in the BoP, so by construction are representative of the full positioning picture.