Weekly Economic Briefings > Emerging Markets Weekly Economic Briefing

The possibility that Brazil's President Rousseff will be impeached and the rise in geopolitical tensions between Russia and Turkey represent two new concerns facing EMs; adding to ongoing worries about sliding commodity prices, weak Chinese import demand and tighter US policy. Indeed we have reduced our forecast for growth in EMs in 2015 from 3.5% to 3.4% and from 3.9% to 3.8% for 2016.Our latest Global Scenarios Service report outlines the key risks to our baseline forecast. We see a 10% chance of a hard landing in China, with residential investment dragged even lower. The shock would spill over to other EMs, particularly Asian economies that are very reliant on goods trade, while commodity prices would be significantly lower, sharply affecting EMs that are dependent on commodity revenues. We also see a 10% chance that markets could be surprised by the pace of Fed tightening next year. Amid market turmoil, EMs would bear the brunt of the adjustment.Brazil and Russia are two of the most fragile EM economies. Both are already in recession with dismal structural fundamentals. Both rely on commodity exports and both are exposed to the risk of capital outflows which would push currencies down, tighten financial conditions and delay any return to growth. In Russia there are some signs of the decline in output easing but conditions remain poor, particularly for consumers, and the central bank does not have any scope to ease policy. In Brazil, political change could be positive for the economy in the long term, but the heightened uncertainty during an impeachment process could intensify an already deep recession.Looking across all EMs, the scope to ease policy is now limited in many countries either by inflation concerns, worries about disruptive currency moves or high debt levels. China stands out as the one major EM where we expect more incremental easing going into 2016. And with policymakers keen to meet their growth targets and having the policy space to do so, we think the probability of a hard landing remains low, particularly with consumer spending staying resilient.