Spurred by falling interest rates, global debt rose by a hefty $3 trillion in Q1 2019.  At over $246 trillion, global debt is now just $2 trillion shy of the all-time high of Q1 2018.  EM debt hit a record $69 trillion in Q1 2019—over 216% of GDP. 

Since the height of the Lira and Peso sell-off in August 2018, both currencies have weakened sharply in real effective terms. While both have seen their current account deficits narrow sharply, this is mostly due to cyclical weakness and not genuine rebalancing. This is why our FX fair value model signals that both the Lira and Peso are only fair and not undervalued.

Powell reaffirms dovish stance—but if stronger U.S. data derail cuts, could a bond market selloff be on the horizon?; Catch-22: central bank accommodation intended to support growth ends up hurting the financial sector; Over 17% of the EM USD corporate bond universe (ex-financials) have credit ratings on “negative outlook”; U.S. investors have growing exposure to climate risk via their cross-border investments—especially in equities; International investors shift into Chinese RMB bonds after index inclusion—foreign holdings now at a record $284 billion

Colombia's public debt has increased steadily. We assess the medium-term fiscal framework, which includes optimistic growth projections, relying heavily on improved tax collection. Debt will fall slowly in conservative scenarios.

Activity in China slowed significantly in mid-2018, but has been stable since September despite tariffs. A revival in credit-intensive sectors offset tariffs, which clearly affected export volumes to the US. Scope for policy support remains if growth falters.

Strong domestic spending has kept output above potential, intensifying inflation pressures. Weaker foreign demand should allow policies to remain accommodative in the near term. Labor shortages and reduced access to EU funds will be the main medium-term challenges. 

We scan current accounts from a savings-investment angle, analyzing the contributions of public and private imbalances. Argentina’s external imbalances are mostly fiscal in nature, while Turkey’s are driven by a credit-dependent private sector. South Africa and Colombia run twin fiscal and external deficits.

Portfolio flows to Emerging Markets were $40.8 bn in June, the highest level in 5 months. Our tracking shows a surge in flows, driven by a strong recovery in Chinese equities. Equity and debt flows were $12.6 billion and $28.2 billion, respectively. Net capital flows into EM were -$18.6 billion in May.

EU structural funds have boosted growth in Eastern Europe, allowing for strong income convergence with the rest of the EU. Cuts in the 2021-27 EU budget will lead to smaller contributions, but a sudden slowdown is unlikely, and convergence will continue.