Resident outflows were a source of pressure in 2018. They are unlikely to abate as the election approaches since Argentina’s electoral cycles often prompt outflows. We are far from the outflows seen in the 2001 crisis, but the external funding picture will remain tough given limited resources left under the IMF program.

Zambia borrowed extensively from abroad after 2015, leading to considerable external financing requirements. Fiscal and monetary policy will have to be contractionary, however, the level of adjustment needed is very large. Thus, Zambia is a prime candidate for an IMF program.

US tariffs should be imposing a strain on China’s balance of payments, most obviously in the current account. But the surplus is rising, in part due to quite healthy exports. Instead, trade tensions may be manifesting in capital outflows, which are above 2012 levels and half 2015/6 levels. Tariffs may be raising RMB depreciation expectations, an issue of great importance to China’s policy makers and the rest of EM.

The risk of automation in CEE is relatively low compared to other EMs, but differs considerably within the region, with EU member countries facing less risk. The skill composition of employment appears to play an important role, as does an economy’s relative urbanization and labor market diversification.

Pemex’s woes turned Mexico into an oil importer. The current account could improve significantly if Pemex’s planned output increase materializes. Vulnerability would rise if Pemex underperforms, as gasoline imports would continue growing.

We still expect Brent oil prices to average $65/b in 2019 and $62/b in 2020. Growth in non-OPEC supply combined with deceleration in global oil demand growth in 2019 and 2020, is offsetting upward pressure on oil prices from rising geopolitical tensions that could disrupt supply.

Real GDP growth in the Caucasus and Central Asia (CCA) remains strong in 2019, recovering from earlier external shocks of a fall in oil prices and sanctions on Russia. Growth should remain strong beyond the near term, although lower commodity prices and slowdown in major partners could pose risks.

Pemex’s planned output increase has precedent, but is in the upper range of what others achieved. Shoring up Pemex involves a near-term fiscal cost, but could ease fiscal pressure in the medium-term. If Pemex disappoints, more fiscal cuts will be needed.

Household debt has fueled China's housing, consumption, and economic growth. Households' large financial and housing assets mitigate the risks of rising leverage. However, household leverage is no longer low relative to income, and can no longer be used to stimulate economic growth. 

The GCC countries followed the Fed and cut their key policy rates, given their pegged exchange rates. Lower interest rates will encourage borrowing and stimulate non-oil growth, which has been weak in recent years. We expect non-oil growth to pick up from 2.1% in 2018 to 2.8% in 2019.