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.
Widening fiscal deficits could create financing challenges going forward. As the economy recovers, domestic investors may provide less funding. If fiscal consolidation is not realized, “prescribed assets" are one option. South Africa could also approach the IMF for a Stand-by-Arrangement.
The new IMF program improves the funding outlook. An external financing gap next year cannot be ruled out. High borrowing needs would require tapping additional sources. Limited REER adjustment could exacerbate external vulnerability. The February 2021 election adds program implementation risk.
Demonstrations and strikes continue following the disputed election. The most likely near-term scenario is a prolonged political stalemate. We consider a number of scenarios to assess external financing stress. In the absence of further escalation, reserve losses would be manageable.
We expect Pakistan to return experience modest growth in FY2020/21 following a small contraction in FY2019/20. However, risks to the economic outlook are tilted to the downside. Recurrent outbreaks of COVID-19, a large fiscal deficit, and high public indebtedness remain major challenges.
Widespread demonstrations and strikes followed the presidential election on August 9. Political uncertainty, together with the COVID-19 shock, weigh on the economic outlook. Belarus’ economy is highly dependent on Russia’s energy subsidy and domestic SOEs. The disputed election results mean that international financial support is very unlikely.
COVID-19 has exacerbated El Salvador’s external financing needs. Pressure has intensified amid a widening fiscal deficit, and financing options are narrow. With limited flexibility to unwind stimulus after COVID-19, an IMF program would help ease medium-term financing concerns.
China’s economic recovery in 2Q2020 was mainly driven by manufacturing and construction, thanks to effective pandemic control and policy support. Increases in household income and consumption are needed to make the recovery more sustainable. We expect the economy to grow by 2.2% for the whole year.
The explosion in Beirut is calling attention to a pervasive culture of negligence, corruption, and complacency among Lebanon's ruling elite. The blast will deepen the contraction in the economy, but may spur badly needed political and economic reforms. If not, the country will continue to sink.