Emerging markets are stable-Moody’s
2023.01.25 12:45
Emerging markets are stable-Moody’s
By Ray Johnson
Budrigannews.com – Moody’s Analytics said on Wednesday that smaller emerging markets are no longer at risk of a bigger sovereign debt crisis. However, their economic growth is still hindered by weaker currencies, unemployment, and high interest rates.
Moody’s said in a report that big exporters of commodities like Brazil and Indonesia did “surprisingly well” after the Russian invasion of Ukraine, benefiting greatly from the rise in energy, metal, and agricultural commodity prices.
On the other hand, as geopolitical tensions between Russia and the West escalated, new manufacturing investments were made, and exports of automobiles, electronics, and semiconductor components increased, economies that were less reliant on commodities like Vietnam and Mexico also performed better.
Moody’s said that these factors have reduced the damage that the tightening monetary policy cycle in developed economies, led by the U.S. Federal Reserve, has done to emerging market equity and currency markets.
Moody’s said that despite this, Latin American emerging countries may experience a sharper contraction than other emerging regions due to their greater reliance on commodity prices, their currency’s volatility, and their lack of recourse to countercyclical fiscal policy.
“With unemployment rates remaining elevated well into 2024, the lack of robust fiscal shock absorbers and lingering barriers to investment make for a more protracted recovery.”
According to Moody’s, Mexico’s economy is expected to expand by 1% in 2023, but a scenario involving persistently high inflation and an aggressive Federal Reserve could result in a contraction of 2.5%.
In 2023, Brazil’s economy is expected to expand by 0.8%, but a debt crisis could cause the largest economy in Latin America to shrink by 3.2%.
Moody’s predicted that China’s economy would expand by 4.3% in 2023 due to its ability to contain “the decline in the yuan, which makes for a smaller rise in imported inflation and enables policymakers to enact stimulus earlier without fears of stoking price pressures.” China’s economy, on the other hand, is expected to expand by 4.3% in 2023.
