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.
The Caucasus and Central Asia (CCA) region was hit hard by COVID-19, with energy exporters also enduring the oil price collapse. Exchange rate flexibility, support from the IMF, and low risk of sovereign debt distress will help most CCA countries remain stable through 2021 absent further outbreaks.
COVID-19 has exacerbated Costa Rica’s external and fiscal imbalances. We project a widening of the current account deficit driven by the services sector. Further IMF funding would be needed to cover a potential external financing gap. External risk remains tied to substantial fiscal vulnerability.
We analyze external adjustments in EM Asia following the COVID-19 shock. Cross-border flows are shifting considerably in many countries in the region. The global recession weighs on exports and weak domestic demand on imports. Other sources of FX inflows have come under significant pressure as well in H1. This includes both international tourism revenues and workers’ remittances.
The ASEAN region is now China’s largest trading partner, top tourism destination, and a key investment partner. However, the depth of these relationships vary among the individual ASEAN member states. We expect economic integration to continue in the region.
Concerned with the economy's already-high debt levels and RMB stability, the PBoC was the least dovish major central bank this year. The PBoC has begun to suspend even this moderate pandemic emergency stimulus as China’s economy recovers and as concerns about financial froth increase.
A recent PBoC survey revealed information regarding Chinese household balance sheets. Chinese households’ net worth is surprisingly large thanks to high savings rates and rising home values. The under-allocation in financial assets means poor liquidity yet great potential for diversification.
We examine currencies in the MENA region with large secondary market discounts, the biggest of which are in Lebanon, Syria, Iran and Sudan. The divergence of official and parallel FX rates in these countries reflects decades of economic mismanagement, public corruption, and international sanctions.
We analyze the impact of COVID-19 via early activity indicators. Tourism and remittances receipts are key vulnerability drivers. Despite shrinking services surpluses, falling goods imports have kept external pressure contained. Monetary policy has eased markedly, while fiscal space is more limited.
The COVID-19 response will improve medium-term growth prospects for the CEE-4. Stronger government finances provided countries with room for stimulus measures. The ECB’s response has also allowed authorities to cut rates and start bond purchases. Finally, the EU’s proposed recovery fund would improve growth prospects markedly.