July 11, 2018 ( Lagos ): EMs outlook appears favorable over the rest ofthe year with IMF forecasting a 10bps YoY expansion in economic growth to 4.9% in 2018. This expectation is largely hinged on upbeat macroeconomic outlook in Emerging Asia and Europe which would more than offset possible shocks from Latin America and other Emerging economies. However, while tighter financial conditions in the US is expected to have spillover effects on EM economies, the still elevated commodity prices would more than neuter its effect on growth.
In China, the pace of output expansion is expected to decelerate to 6.6% (6.9% in 2017) as the government places tougher limits on industrial pollution, as well as regulatory crackdown on riskier lending practices which has pushed up borrowing costs and crackdown on local government spending.
In addition, a potential trade war between US and China could pose a great risk to China’s growth. In India, the economy is expected to grow 7.4% in 2018 fiscal year20 (2017: 7.1%) on the back of strong private consumption as well as fading transitory effects of its demonetization as well as implementation of the national goods and services tax.
Elsewhere, US decision to shield Brazil from its steel and aluminum tariffs provides boost to the economy. However, analysts see risk springing from rising political uncertainty, as President Michel Temar scrapped his intention to seek for re-election. Over in Mexico, US tariff slam of 25% and 10% on Steel and aluminum respectively poses threat to the country’s trade position over the near term.
More so, the imposition of US tariff on Mexico and Canada is a pointer to likely fallout of the NAFTA negotiations between member nations. If this plays out, this could lead to confidence shock on Mexico’s economy and drive short term market volatility as Mexico is heavily dependent on the US with over 75% of its exports sold to American consumers. In Turkey, growth is expected to moderate to 4.4% in 2018 as government fiscal stimulus begins to fade off following President Erdogan win in the June snap election which was supposed to hold in November 2019.
Reporting for EasyKobo on Wednesday, 11 July 2018 in Lagos, Nigeria
Source: ARM Securities Limited
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