The IIF covers 30-40 emerging and frontier markets, with a particular focus on economic and financing issues. Our reports feature topical analysis of macroeconomic fundamentals, policy developments, political economy dynamics and downside risks.
Venezuela’s GDP decline is nearly unprecedented, as is the collapse of oil output, its main export. The initial impact of US sanctions was manageable, but history suggests they will have severe effects. Recoveries from oil output collapses tend to be fast, making higher oil revenue feasible if policies change.
Trade tensions raised fears of slowing global trade. We develop a model to track US trade in real time, based on detailed weekly customs information. The picture is more positive than in Asian data, as US trade stabilized in real terms in early 2019. We think that global trade fears are overblown.
We present estimates of Venezuela’s external debt, which more than doubled in the last decade. Nearly half of Venezuela’s debt sits with PDVSA. Non-bonded debt, especially bilateral loans, is high. External debt rose sharply relative to exports, and, on this metric, is very high relative to peers.
Growth momentum continues, albeit at a slower pace in 2019 and 2020. Capital inflows will cushion pressure from weaker current accounts. Fiscal deficits and trade tensions are the main risks to the outlook.
Average growth in MENAP is foreseen to decelerate slightly to 2.2% in 2019—below the population growth. This aggregate picture, however, hides considerable heterogeneity in economic paths across the region. Non-resident capital inflows to MENAP should rise marginally this year to $189 billion.
China’s imports of US goods fell sharply last year, in response to new US tariffs on Chinese goods. We attribute the decline to a retaliatory 25% tariff, but data suggest non-tariff measures were also used. China substituted certain US imports markedly, in favor of countries like Russia and Brazil.
South Africa’s Budget 2019 includes adjustments, which are markedly offset by sizable bailout funding for Eskom, leaving the government’s deficit targets to widen compared to those presented last October. The worsening fiscal position and rising public debt are key risks for the credit rating.
Angola is seeking to make its growth model more sustainable, inclusive, and diversified. An IMF program has started, and policy adjustment is underway, but benefits will take time to accrue. Evidence connecting key figures to a Mozambican scandal may limit the credibility of the reform drive.
Egypt is making good progress on economic reforms in the context of an IMF-supported program. However, to sustain the progress and to lift the growth trajectory durably over the long term, deeper and more fundamental reforms are urgently needed.
External funding dried up as the economy collapsed, pushing the current account roughly into balance. Import compression was unavoidable as exports fell. External deficits are not the issue, unlike past EM crises.