Estimates for Euro periphery output gaps are oddly small, even where real GDP has fallen substantially in the last 10 years. These estimates implicitly assume lots of activity is permanently lost, with potential “bending” down, almost as if to validate low actual GDP. The reality is that economic slack on the periphery is likely still sizeable, and holding down underlying inflation despite unprecedented ECB easing.

In this edition of Sticky Notes, we look at takeaways from the U.S. mid-term elections, the latest U.S.-China trade talks, Brazil in the wake of a newly elected government, and U.S. soybean exports.

EM bank lending conditions tighten further in 2018Q3. Credit standards and funding conditions weakened more in Q3, as trade finance and the demand for loans began tightening. EM Europe saw their conditions worsen the most, while Sub-Saharan Africa was the only region to improve. Respondents expect less tightening in lending conditions for Q4.

One factor behind global equity market jitters: the growing focus on credit risk. Credit spreads have widened only modestly in 2018, but look increasingly vulnerable to a trigger event. Rising rates highlight vulnerabilities in housing markets. Less reliance on hard-currency debt in EM Asia ex-China, but more in Africa/Middle East. 
 

• Sanctions lowered capital flows to Russia permanently, limiting severely the ability of banks to borrow abroad.
• Risk of new sanctions put pressure on government flows. We assess scope for contagion from expanded sanctions.
• Foreign bank exposures to Russia shrunk significantly, and would be manageable under expanded sanctions.

Private sector balance sheets are susceptible, at varying degrees, to external debt rollover risk and lira depreciation. Under the currently improving, yet fragile, investor sentiment, Turkey’s sizable amortization payments will continue to expose the economy to high rollover risk through 2019. 

Global debt declined by $1.5 trillion to $247 trillion ($187 trillion ex-financials) in Q2 2018-mainly driven by mature markets. In contrast, EM debt continues to rise, topping $71 trillion in Q2 ($60 trillion ex-financials).

China's current account has traditionally registered large surpluses, but has swung into deficit this year based on data from Q1 through Q3, adding to the case that the RMB could be overvalued and needs to depreciate.

Just as in 2015, our activity tracker points to a slowdown, "¦ even though official GDP figures remain broadly stable. We compare the current slowdown

Investors undeterred by the prospect of gridlock after the U.S. midterm elections China sees much weaker FDI in Q3, though exports have held up well F

The ninth annual global bank risk management survey, "Accelerating digital transformation: Four imperatives for risk management", carried out by EY and

On November 5, the U.S. sanctions on Iran's financial and energy sectors took effect.' The temporary allotments, combined with the increased global oi

As the first paper in the IIF's Thematic Series on Machine Learning, we explore the topic of "explainability" of these techniques as they are adopted

The IIF recently wrote to the EU Institutions concerning efforts to tackle money laundering and terrorist financing. The letter calls for improved inf