We assess Venezuela’s macroeconomic fundamentals after years of policy mismanagement and social turmoil. The GDP drop is on par with the Soviet Union’s collapse.

We project solid growth and contained inflation this year and next. Main risks to the outlook are linked to external conditions as domestic policies have generally improved. While progress has been made to address longstanding challenges, major structural weaknesses remain.

US imports from China continue to grow despite tariffs. We examine whether this means tariffs are ineffective, creating value, volume, and price series by tariff group.

A soft exit out of the debt overhang is possible and the authorities now recognize the urgency of committing to meaningful and widespread reforms to improve long-term fiscal sustainability and rebuild confidence. However, the scope of credible reforms for 2019 remains unclear.

Sanctions lowered capital flows to Russia permanently but robust oil exports cushioned their economic impact. Our BoP Nowcast suggests a still manageable situation, despite a falling current account surplus due to lower oil.

We assess the impact of potential policy surprises, using our BoP Nowcast and positioning toolkits. Low current account deficits pose limited risk, but in Mexico heavier positioning than in Brazil could amplify the impact of negative policy surprises.

Turkey and Argentina saw sharp depreciations in 2018, that erased substantial real exchange rate overvaluations. We assess the BoP impact in 2019 using our Nowcast.

Indian shadow banks came under pressure in 2018. We assess how much of a macro risk they pose.

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.