德银-136页新兴市场展望2018：协同增长（宏观）-20171207-_136页-4mb

Emerging Markets Outlook 2018 Summary

Core Content

This document outlines the outlook for Emerging Markets (EM) in 2018, emphasizing synchronized growth and the increasing importance of country-specific factors, particularly political developments and geopolitical risks. It provides detailed economic forecasts for various regions and countries, along with insights into foreign exchange (FX), interest rates, and credit performance.

Key Economic Forecasts

Real GDP Growth

• Global EM: 4.8% (2018F), 5.0% (2019F)
• Asia (ex-Japan): 6.1% (2017F), 6.0% (2018F), 6.0% (2019F)
• LatAm (ex-Venezuela): 1.7% (2017F), 2.7% (2018F), 3.0% (2019F)
• EMEA: 3.8% (2017F), 4.9% (2018F), 5.0% (2019F)
• BRICs: 5.6% (2017F), 5.8% (2018F), 5.9% (2019F)

Inflation (Consumer Prices)

• Global EM: 3.8% (2017F), 4.3% (2018F), 3.8% (2019F)
• Asia (ex-Japan): 2.3% (2017F), 3.1% (2018F), 3.0% (2019F)
• LatAm: 3.8% (2017F), 4.3% (2018F), 3.8% (2019F)
• EMEA: 3.8% (2017F), 4.3% (2018F), 3.8% (2019F)

Current Account (as % of GDP)

• Global EM: 0.6% (2017F), 0.4% (2018F), 0.2% (2019F)
• Asia (ex-Japan): 1.4% (2017F), 1.1% (2018F), 0.8% (2019F)
• LatAm: -1.5% (2017F), -2.1% (2018F), -2.6% (2019F)
• EMEA: -0.8% (2017F), -1.2% (2018F), -1.8% (2019F)

Fiscal Balance (as % of GDP)

• Global EM: -3.6% (2017F), -3.5% (2018F), -3.4% (2019F)
• Asia (ex-Japan): -4.0% (2017F), -4.0% (2018F), -3.3% (2019F)
• LatAm: -3.8% (2017F), -4.3% (2018F), -4.7% (2019F)
• EMEA: -3.1% (2017F), -2.8% (2018F), -2.7% (2019F)

Main Points

Synchronized Growth

• Global EM growth is expected to remain supportive.
• Asia's cycle is most advanced, while LatAm is catching up.
• Growth is becoming more balanced and less dispersed.

FX Outlook

• EM FX is expected to deliver total returns just below 5%.
• LatAm FX is anticipated to perform well, driven by strong growth and contained external vulnerabilities.
• The Fed's policy normalization is not as impactful as in 2013 due to improved EM external positions.
• China's soft-landing is a key factor for LatAm FX performance.

Rates Outlook

• EMFI (Emerging Markets Fixed Income) is expected to see a shift from a downtrend to a more range-bound environment.
• Total returns are projected to be flat in Asia, about 4.5% in EMEA, and just below 4% in LatAm.
• The benign inflation backdrop and FX revaluation are key supports for EM fixed income.
• EM credit may face challenges due to rising base rates and tighter valuations.

Credit Outlook

• EM credit is expected to see mild spread tightening.
• Total returns for EM credit are projected to drop to near 3%.
• Country-specific factors and curve views will play a larger role in returns.
• Higher beta sovereigns are favored due to thinner yield cushions.

Political and Geopolitical Risks

• Brazil: Presidential election in October 2018; potential for unproven or off-center government.
• Mexico: Congressional and presidential elections in July 2018; political uncertainty.
• South Africa: ANC leadership vote in early 2018; risk of party split and Moody's downgrade.
• Russia: Presidential election in March 2018; potential for rate cuts as inflation rises.
• Egypt: Presidential election in February-May 2018; likely rate cuts.
• Turkey: Political and geopolitical risks remain high; inflation and FX weakness persist.
• Venezuela: Possible largest debt default in EM history; event risk is high but largely priced in.
• India: Election cycle in 2019; weak credit/growth cycle.
• Indonesia: Election cycle in 2019; weak credit/growth cycle.
• Colombia: Congressional and presidential elections in March and May 2018; political uncertainty.

Key Political Events in 2018

EM Differentiation Amid Synchronization

• EM growth remains supportive, but the trend growth differential compared to pre-GFC is lower.
• FX valuations are supportive, and external vulnerabilities are subdued.
• High leverage may become a concern in some Asian economies as CBs hike rates.

Risks and Challenges

• China: Deleveraging efforts may slow economic activity; property market correction is a risk.
• Hong Kong: Looming property market correction could drag growth sharply lower.
• India: RBI guidance is more hawkish; inflation risks are upside.
• South Africa: Fiscal challenges and political uncertainty could lead to Moody's downgrade.
• Turkey: Inflation and FX weakness remain key issues.

Conclusion

The outlook for EM in 2018 is cautiously optimistic, with synchronized growth providing support. However, the main headwinds are narrowing gaps between EM and DM and tightening liquidity conditions. Political developments will play a critical role, particularly in Brazil, Mexico, South Africa, Russia, Turkey, and Venezuela. FX and credit performance will be influenced by monetary policy normalization, inflation dynamics, and external vulnerabilities. Asia is expected to lead the growth cycle, while LatAm is catching up. EM credit will face tighter conditions, but favorable valuations and portfolio inflows will help support returns.