Portfolio flows to EM stood at $30.7 bn in December. Equity and debt were $12.9 bn and $17.8 bn, respectively. Net capital flows to EM reached $0.7 bn in November.

Structural impediments remain unaddressed and constrain near-term growth. Low growth is the main reason for revenue underperformance and rising debt. Credible fiscal consolidation could improve business and consumer sentiment, paving the way for real GDP growth to pick up to around 2% in the medium term.

As a roadmap to carbon neutrality by 2050, the Green New Deal is seeking profound structural change in the EU’s growth model—in production, consumption, investment and saving.

The annual RiskMinds International conference was held in Amsterdam during the first week of December, drawing an extensive Chief Risk Officer (CRO) community from all continents, including many of the regular participants in the IIF’s various regional CRO Fora.

This month's topics include:

• FSOC Final Interpretive Guidance on Non-Bank Financial Company Determinations
• IAIS Draft Application Paper on Liquidity Risk Management
• IAIS Annual Conference, November 14-15, 2019, Abu Dhabi, UAE
• IIF Insurance Dialogue - December 6, 2019, London, U.K. 

Ukraine’s new agreement with the IMF is critical for external financing, even though recent flows into domestic bonds have alleviated pressure. The agreement signals confidence in ongoing reform efforts to markets, and will lead to renewed investor interest in local government bonds.

Five months into the IMF’s $6 billion EFF program, Pakistan’s progress looks better than anticipated. • We expect official reserves to continue recovering as the current account narrows and capital inflows improve. However, gross external financing needs at around 9% of GDP warrant caution. 

The extra 0.5 mbd cut may not be enough to rein in projected oversupply in 2020, since the OPEC+ bloc has already made cuts well beyond the 1.2 mbd target of the previous agreement. Consequently, we expect a decline in average Brent oil prices to $60 a barrel in 2020.

Lower government spending has decreased medium-term fiscal vulnerabilities to lower oil prices. As the PIF is taking a leading role in public investments, capital expenditures in the budget have declined significantly. Despite fiscal headwinds, non-oil growth is expected to remain solid at 2.7%.

The December 2019 IIF Global Regulatory Update provides updates on current work streams. 

Sustainability accounting hits the big time; Overwhelming demand for ESG data—over 55 data/service providers compete in this $600 million market; Flows to ESG-dedicated ETFs set to top $40 billion in 2019—up over 20% from 2018 levels; New issuance of sustainable debt and loans has surged more than 40% to some $380 billion in 2019; Firms are affected differently by ESG issues—further research needed on “materiality” factors at sector and industry level    

The release of the 2019 MTBPS was a wake-up call for politicians, just like in 2017. The 2020 budget in February, union negotiations, and Eskom resolution are key. Moody’s is likely to downgrade South Africa’s rating to sub-IG sometime in 2020. A deep domestic market and low short-term and FX debt mitigate our concerns. But with deteriorating debt dynamics, South Africa is exposed to external shocks.

Protests have continued since February, with the public calling for an overhaul of the ruling elite, but we expect limited change in the power structure. Economic activity will remain weak, as twin deficits persist and reserves fall. The 2020 budget envisages tightening, but deep reforms are needed.