Argentina’s economic crisis is not over; USD-ARS and local rates are likely to move higher
• Inflation is expected to spike, and the economy to contract; this is bad news for Brazil
• The trade links between Brazil and Argentina are significant
To paraphrase Mark Twain, the reports of the death of EM bond markets have been greatly exaggerated. Increased global allocations to local EM bond markets have been not cyclical but primarily structural in nature, reflecting these markets’ rising ec...
Most of the coincident and leading indicators point to Q2-2013 being as weak as Q1-2013
• Additionally, the breakdown of key indicators suggests H2-2013 will be worse than initially thought
• We lower our GDP growth forecast for 2013 to 2.2% from ...
Temporarily weaker oil output and a continued global slowdown will likely pressure the BoP in 2013
• External accounts should trough in 2013, with continued improvement from 2014 onwards
• By 2020, Brazil’s oil and derivatives production is set t...
We expect stronger but moderate growth in 2013
• Inflation will remain a concern and monetary policy will be tighter
• The reform agenda remains light as 2014 elections approach...
Growth is still expected to improve in 2013; however, we revise lower our projection to 3.2% from 3.8%
• Inflation dynamics are worrisome, even though we expect headline IPCA to slow in H2-2013
• We think the BCB needs to hike rates; however, mark...
Growth will likely improve in 2013, but risks are to the downside; the supply-demand mismatch continues
• The government will seek alternative fiscal measures to manage inflation; BCB to avoid hiking in 2013
• We recommend a Jan-15 DI receiver pos...
Our meetings in Brazil left us with a less optimistic view on 2013 growth
• If GDP growth falters, we would not be surprised to see the SELIC rate fall further
• The BRL should continue to be range-bound in the near term
• We maintain our recomme...
We revise 2012 GDP growth lower to 1.5%, while maintaining 2013 forecast at 4.1%
• We revise IPCA inflation slightly higher for 2012 and 2013 to 5.3% and 5.6%, respectively
• The minutes of the 10 October meeting show that the current rate-cutting...
Local-currency emerging bond markets have seen ever greater levels of foreign demand as global investors flee from the ongoing European sovereign crisis and continue to allocate to fixed income securities. From less than USD 150bn in March 2009, for...
Local investors show increased optimism about both external and domestic conditions
• Inflation is a source of uncertainty for 2013, rather than during 2012
• BCB tightly manages the BRL, which is expected to remain within the 2.00-2.10/USD range ...
Our base-case scenario shows supportive flows in both merchandise and financial accounts of the BoP
• Weaker global growth may hurt financial flows, but the outlook for FDI remains solid
• This is because Brazil has significant pent-up demand for...
The record-low SELIC rate should be adjusted even lower in the upcoming months
• BCB is vindicated by sub-5% inflation, weaker-than-expected growth and the messy global backdrop
• We expect the BCB to refrain from aggressive tightening in 2013, ev...
Growth dynamics remain very disappointing; we revise down our GDP forecasts for 2012 and 2013
• While the inflation outlook remains benign for 2012, it may change in 2013 when activity picks up
• Nonetheless, the government is eager to keep the S...
Top 3 key data/events
• South Korea – Industrial production likely rose 1.0% m/m in April
• Philippines – Resilient Q1 GDP
• Brazil – COPOM in cutting mode, for now
• India’s Q4-FY12 GDP growth likely slowed to 6.0%, the weakest si...
Top 3 data/events
• Singapore – April industrial production likely rebounded
• United States – Durable goods orders likely recovered in April
• Brazil – BRL: Be careful what you wish for
• China’s State Council’s statement signals ...
Top 3 data/events
• India – The INR hits an all-time low versus the USD
• Euro area – European Central Bank lifts Greek EMU exit taboo
• Brazil – March retail sales likely rebounded
• Fears of a China hard landing based on April r...
Key events and data
• Indonesia – BI to keep interest rates on hold
• Philippines – Export growth to remain positive
• South Korea – BoK to keep interest rates unchanged
• China’s economy shows tentative signs of recovery, but dow...
Top 3 key events and data
• Singapore – April PMI should move further into expansionary territory
• Philippines – CPI should tick marginally downwards
• US – Payrolls to remain anaemic
• ECB’s likely more dovish stance set to contr...
• Despite the current soft patch, the economy is expected to rebound in H2-2012
• Monetary policy is at an inflection point, and the BCB seems to be conducting a new experiment
• Better infrastructure is a necessary condition for stronger long-ter...
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This report provides an economic outlook for more than 60 economies worldwide and investment implications for commodities, credit, equities, FX and interest rates markets in 2014. We expect a better 2014, with world economic growth picking up and inflation staying benign. Global growth should increase to 3.5% in 2014 from 2.7% in 2013, helped by improvements in economic activity in the US and Europe. A pick-up in growth in the West is good news for the rest of the world, and we expect emerging economies’ growth to outpace G7 growth by almost 4 percentage points.
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