Three key themes in emerging markets for 2024

Emerging markets are poised for a year of interest rate cuts in 2024.

March 2024, From the Field

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Today, I’d like to talk to you about the emerging markets and the three themes that we see that are in store for 2024.

Our first theme is inflation and, particularly, falling inflation paving the way for central banks to cut interest rates across the space. Over the course of 2022, inflation spiked in a number of countries, particularly in Latin America and Central and Eastern Europe. That inflation is falling quickly now, opening the way for central banks to cut interest rates aggressively.
 
Our second theme is growth. Over the past 10 to 15 years, the global economy has been very synchronized, and China has been a particular supporter of growth in a number of EM countries. However, going forward China's in the process of restructuring its economy in a multiyear basis, and its growth will no longer be as fast as it was in the past. As a result, China's ability to support emerging market growth is more limited, and they will have to turn to other sources of growth such as their own domestic demand or, perhaps, green energy to drive growth going forward.
 
Our third and final theme is to keep an eye on frontier markets. A number of these countries lost market access in 2022 in the face of high developed market interest rates. We're seeing some of these countries start to return to debt capital markets. As a result, default fears are easing and that should support returns over the course of 2024.

Thanks for joining us today, and we look forward to sharing more insights with you in the future.


 

 

Key Insights

  • Falling inflation in emerging markets (EM) is paving the way for interest rate cuts in 2024.
  • China's ability to support EM growth is more limited now, so developing countries will have to find new sources to drive economic growth in the future.
  • EM external debt could benefit if frontier issuers are able to regain access to the international debt capital markets. 

 

 

Chris Kushlis Chief Emerging Markets Macro Strategist


 

What are the three themes in emerging markets (EM) for 2024? First, with inflation falling, the coast is clear for interest rate cuts. Second, China is unlikely to be a growth engine for EM anymore. Third, keep an eye on frontier markets as signs of issuers regaining market access could be supportive. 

From the Field

Emerging markets poised for a year of interest rate cuts

With progress on bringing down inflation, emerging markets (EM) are poised for a year of interest rate cuts.

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