Emerging markets: headwinds subside

Watch our analysis in the series OUR EXPERTS EXPLAINS: #2 Emerging markets, by Lysu Paez Cortez, EEMEA Senior Economist from Global Markets Research

Which impact had the global economic situation on emerging markets since the beginning of the year?

Continued risks hampered the growth outlook for emerging markets and prompted us to downgrade our growth projections for 2019. However, these risks seem to have eased over the first quarter of the year.

On which fronts have these risks weakened?

In terms of liquidity, the announcement from the Fed that it would halt its rate hikes was very good news for risky assets and therefore for emerging assets. Looking to world trade, negotiations between the US and China have not yet led to a real agreement, but they seem to be calming fears that the trade war would escalate. In China, the government's recent stimulus program should pay off and have a positive impact in the short term. We should also see a weaker dollar and solid oil prices, which should help stabilize the emerging markets.
Lastly, from a more structural perspective, the growth differential should continue to increase to the benefit of emerging markets.

What are the medium-term prospects for emerging markets?

Despite a slightly more tricky outlook for the main emerging markets, like Argentina, Turkey and South Africa, the aspects I mentioned before point to a slightly more optimistic view on emerging economies' performances over the months ahead in both macroeconomic and market terms.