Weekly Economic Briefings > Emerging Markets Weekly Economic Briefing

At the end of last year, we expected the world to grow by 2.6% in 2016 and for emerging markets to grow by 3.8%. But the sharp weakening in global financial markets at the start of this year, combined with modest US domestic activity and concerns that global demand may continue to weaken means we now expect the world to grow by just 2.3% this year, and EMs by just 3.5% little changed on the estimated 3.4% growth last year. The weaker global outlook means we now forecast that the US Fed will wait until September before raising interest rates again. Nevertheless, we still expect the trade-weighted US$ to strengthen by more than 10% this year. Against the backdrop of US rates edging higher, a strong US dollar and fragile domestic fundamentals we see EM currencies staying under pressure.In commodity-reliant Brazil and Russia, we forecast longer and deeper recessions now. In Brazil, we no longer expect further rate hikes; instead, we now see the BCB leaving rates on hold due to political pressures, though this interference is likely to come at a cost of rising debt and credit rating downgrades. In Turkey as well, political pressure is keeping the policy rate artificially low even though inflation is high, elevated further by the recent rise in the minimum wage.In India, which is officially estimated to have grown by 7.6% in the 2015/16 fiscal year, the outlook is brighter although close attention will be paid to the budget later this month to assess the impact of likely fiscal consolidation. China grew by 6.8% in Q4 2015 and although volatile capital flows may reduce the scope for interest rate cuts this year, we expect fiscal policy to play a larger role. We see the two-sided growth picture continuing; with real estate construction and heavy industry still weak but robust consumption and services cushioning growth.