Labor shortages and fragile investor confidence will constrain output growth. Policies will likely become more accommodative, thanks to a dovish ECB and Fed. The external financing and inflation outlook will remain challenging for some. Slow progress in addressing structural problems will intensify vulnerabilities.

Powell reaffirms dovish stance—but if stronger U.S. data derail cuts, could a bond market selloff be on the horizon?; Catch-22: central bank accommodation intended to support growth ends up hurting the financial sector; Over 17% of the EM USD corporate bond universe (ex-financials) have credit ratings on “negative outlook”; U.S. investors have growing exposure to climate risk via their cross-border investments—especially in equities; International investors shift into Chinese RMB bonds after index inclusion—foreign holdings now at a record $284 billion

Colombia's public debt has increased steadily. We assess the medium-term fiscal framework, which includes optimistic growth projections, relying heavily on improved tax collection. Debt will fall slowly in conservative scenarios.

Activity in China slowed significantly in mid-2018, but has been stable since September despite tariffs. A revival in credit-intensive sectors offset tariffs, which clearly affected export volumes to the US. Scope for policy support remains if growth falters.

Strong domestic spending has kept output above potential, intensifying inflation pressures. Weaker foreign demand should allow policies to remain accommodative in the near term. Labor shortages and reduced access to EU funds will be the main medium-term challenges. 

EU structural funds have boosted growth in Eastern Europe, allowing for strong income convergence with the rest of the EU. Cuts in the 2021-27 EU budget will lead to smaller contributions, but a sudden slowdown is unlikely, and convergence will continue.

Addition to the MSCI EM Index would acknowledge capital markets reform and send a positive signal to investors. We expect foreign inflows of $1.8 billion from passive investors and up to $7 billion from active investors in 2020-2022.

Bearish sentiment stems from policy concerns. Key risks are Pemex’s fragility and US tensions. Weakening growth will make fiscal targets challenging to meet and add pressure on the central bank to ease monetary policy. Market discipline and a robust macro framework should help limit policy slippage. 

Neglect of structural distortions has prevented Morocco from matching its more successful EM peers in raising its standard of living. 

High import content in export production and investment is evident across the region. Recent import compression should support current account positions amid weak exports. However, the multiplier effects of import plunge on investment will likely depress GDP growth.