By Siddharth Dahiya, Aberdeen Asset Management
It is fair to say that 2014 has been a turbulent year for markets. It has featured a slowdown in China, crashing commodity prices, concerns about rising interest rates, the withdrawal of quantitative easing in the US and a rate of global economic growth that shows few signs of a meaningful pick-up. And this list does not mention geopolitical issues from Russia’s annexation of Crimea to the perilous rise of Islamic State.
Not an auspicious time for emerging markets, one might think. And a quick glance at the performance of many emerging stock markets or emerging market (EM) currencies would readily confirm that. Nevertheless, emerging market corporate bonds have performed comparatively well. Read more
Tanzania has become the third east African country in as many months to discover the size of its economy is bigger than previously thought, benefiting from a surge of investment from gas explorers.
Tanzania joins neighbours Kenya and Uganda in their hefty upward revisions. Statisticians say the new estimate for the size of the economy in the country of 51m people is $41bn, 32 per cent more than previously estimated and the highest revision leading the east African pack, followed by Kenya (which rose 25 per cent at the end of September) and Uganda (13 per cent, also this month). Read more
Economic growth across emerging markets is expected to reach an annual rate of 3.9 per cent in the final quarter of this year, slightly up on the estimated 3.7 per cent in the third quarter, according to the Institute of International Finance. But the IIF’s Coincident Indicator, based on 41 macroeconomic variables that it says are highly correlated to EM growth, shows growth is still well below the average rate of 4.5 per cent seen in 2012 and 2013.
When the IMF announced this year that China’s economy had overtaken the US economy at purchasing power parity, there was some skepticism about the usefulness of PPP calculations and widespread amazement about the speed at which China had made this transformation.
Both themes carry over in a note on Friday from HSBC, which examines the data more closely to conclude that, even after switching variables, the size and importance of the Chinese economy cannot be denied. Read more
Uganda has become the latest African nation this year to re-calculate the size of its economy and reveal a much greater gross domestic product, following Nigeria and Kenya.
Following a statistical revision Uganda said its GDP was roughly $25bn at the end of the fiscal year 2013-14, about 13 per cent more than previously thought. The change was made by bringing forward the base year for calculations to 2010 from 2002, when the structure of the economy was very different and booming sectors such as banking and mobile telephony had barely taken off. Read more
“If you see ten troubles coming down the road, you can be sure that nine will run into the ditch before they reach you.”
For about two weeks in late October, it seemed as if these optimistic words from Calvin Coolidge, the former US president, might have encapsulated the mindset of emerging market (EM) investors.
But the late October rally in EM financial assets has now stalled. Investors are relinquishing hopes that market troubles may turn out to be mere phantoms and focusing again on the very real problems coming their way. Four of the most intractable are set out below. Read more
A double dose of gloom from Capital Economics on Tuesday. Its proprietary EM GDP tracker – compiled from monthly data on output and spending as an advance proxy for GDP – shows growth slowing across emerging markets to its slowest pace since early last year. A separate report shows that while EM assets have suffered across the board this month, the pain has been particularly severe in Latin America and especially in Brazil.
First, here are the charts from the GDP tracker. They show growth across EMs slowing to 4.3 per cent year on year in July, down from 4.5 per cent in June. Capital says preliminary data for August suggest growth will be even slower, at 4.1 per cent. Read more
The sigh of relief coming out of Mexico has been practically audible. “Alleluia!” exclaimed Nomura in a research note.
It’s not so much that there was doubt that growth was really happening, though after last year’s shock slump (GDP expanded a meagre 1.1 per cent overall), taking growth for granted looks ill-advised.
However, the indication that GDP grew by a stronger-than-expected 2.52 per cent in July, the fourth consecutive monthly rise, is a reassuring confirmation that things are on the right track. Read more
Expectations can be a terrible burden. Take the World Cup. No European football team has ever won the tournament on Latin American soil. That is partly why Brazil and Argentina are the favourites to win. Question: will they pull off a victory under so much pressure
Now take economies. Not long ago, emerging markets were all the rage, while deflation-bound economies of the eurozone were just about written off. Times have changed, however. When it comes to economic expectations, Latin America has already lost the cup to Europe’s teams. Read more
After a day of upbeat comments on Monday, delegates attending the African Development Bank’s annual meeting are sounding a little more cautious on Tuesday, highlighting some of the big challenges that the continent needs to overcome.
For all the progress made over the last decade and a half, Africa remains poor and, often, hungry. Donald Kaberuka, the AfDB’s president, summarised the sentiment, telling delegates in Kigali, the capital of Rwanda: “You can not eat GDP.” Read more
It had, it turns out, been too good to be true. After a positive start to the year, Brazil’s industrial production fell by 0.5 per cent in March from February and by 0.9 per cent in comparison with March 2013, national statistics agency IBGE said on Wednesday.
The figures will add to the gloom in Brasília, after the central bank’s weekly survey of market economists on Monday showed the consensus on GDP growth during 2015 falling below 2 per cent for the first time, to 1.91 per cent. The outlook for this year is a marginally more dismal 1.63 per cent.
Brazil’s growth story, it seems, is failing to produce any happy endings. Read more
It’s a common trick to make yourself look bigger than you are to win a fight. Rather rarer is for one of the world’s largest and fastest-growing economies frantically and consistently to try to hide its size. China, the 500kg panda in the global economic room, is trying an increasingly unconvincing tactic of squeezing itself into a corner and hoping no-one notices it is there.
Today, we have questioned stability in an election where major state-based parties have so far refused to take sides.
And we questioned data on economic growth at the state level – data that many of India’s politicians are flaunting ahead of the polls. Read more
Some good news at last for the beleaguered Brazilian government: GDP growth in 2014 was 2.3 per cent, including 0.7 per cent in the fourth quarter, beating surveys by Reuters and Bloomberg which both had a consensus for 0.3 per cent in Q4.
Among those heaving sighs of relief will be the central bank, whose widely-followed GDP indicator, the IBC-Br, had suggested a marginal contraction in activity in the fourth quarter, which would have put Brazil into a technical recession (two consecutive quarters of contraction). Read more
Five per cent GDP growth is these days more associated with the fittest Asian and African emerging economies than the sluggish EU fringe, but Romania has sprung a surprise with its Q4 2013 figures, its best for five years.
A flash estimate from Bucharest’s National Institute of Statistics on February 14 suggests that the economy grew by 5.2 per cent year-on-year in the final quarter of last year. This takes its full-year rate to 3.5 per cent, among the fastest in Europe and appreciably above a recent IMF forecast of 2.8 per cent. Meanwhile inflation, once a serious concern, fell to an all-time low of 1.1 per cent in January. Read more
These days, Jim O’Neill doesn’t bother much with “Brics” – the moniker he invented. The former Goldman strategist is more into “growth markets” instead. So – is it time for him to look more closely at the FTSE100, rather than the Bovespa?
Based on the new Bank of England projections, the UK economy is set to grow at a 3.4 per cent clip this year. Not too shabby. Less shabby still when compared with the supposedly “high growth rates” in certain parts of the emerging world. Read more
So, China’s gross domestic product grew by 7.7 per cent in 2013. Much media comment has focused on how this performance, by Chinese standards, is relatively lacklustre. It is, together with last year’s 7.7 per cent expansion, the lowest growth rate since 1999.
However, there is another perspective. A quick look at the International Monetary Fund’s list of countries’ GDP numbers shows that China grew last year by an amount somewhat smaller than the size of the entire Indonesian economy but larger than Turkey. Read more
It looks like Colombia’s economy is coming back to the boil.
Official growth figures for the third quarter show that the economy grew 5.1 per cent, compared with the same quarter a year earlier, beating the consensus forecast of 4.3 per cent. Read more
Thailand’s GDP figures were a bit of a disappointment on Monday, showing growth in Q3 of just 2.7 per cent.
The main culprit was domestic demand, which fell 1.2 per cent year on year. That’s a particular blow as local consumption has up to now been one of the most consistent drivers of growth: since 2007, domestic demand has fallen only in the exceptional circumstances of the global financial crisis of 2008-09 and Thailand’s huge floods of 2001. So what’s the problem now? Read more
Maybe it’s time to start preparing for a return wave of CEE migrants from western Europe, as Thursday’s flash GDP third quarter numbers show that most of the region’s economies are experiencing a sharp recovery – in contrast to stagnation in the eurozone. Read more