We use VAR models to decompose the effect of commodities and FX on EM inflation. Turkey and Russia, for different reasons, appear most exposed to exchange rate shocks. Headline inflation in South Africa and Brazil appear to be driven by energy prices, while price dynamics in Indonesia are more responsive to non-energy commodities. We expect tight stances in Brazil, Mexico, Russia, Turkey to keep expectations anchored.

Since 2008, local governments (LG) have accounted for 80% of the increase in China’s government debt. Containing LG debt has become a policy priority given their limited fiscal resources and growing indebtedness. 

The global infrastructure gap to 2040 is $15 trn; EMDEs need to invest 4.5% of GDP per year on infrastructure towards SDGs; Public action: rising clean energy R&D budgets, new U.S. infrastructure deal, greening the BRI, G7 “Build Back Better World.”

The June 2021 Global Regulatory Update provides updates on current work streams. 

Growth prospects have improved, spurred by copper prices and public spending; Chile is on track to be one of the first LatAm countries to return to pre-pandemic output. However, political uncertainty weighs on investment, clouding the medium-term outlook. Doubt is rising on the rollback of spending. 

While the election of Ebrahim Raisi as the new president will not derail the nuclear negotiations, the U.S. may not be able to extract concessions on critical issues. The likely outcome for the JCPOA negotiations is a return to the 2015 agreement, which would keep many sanctions in place. 

This note investigates the forces that have contributed to China’s debt burden since 2009. We found that the lever-age ratio, defined as debt relative to GDP, was driven by different forces at different times. China’s three deleveraging attempts garnered mixed results. 

We continue our series on EM inflation by turning towards country specifics. In this note, we examine inflation dynamics in Russia, South Africa, and Turkey. As demand is a key driver of inflation in Russia, we expect further tightening. In South Africa, we see the pickup as transitory and largely driven by base effects. Turkey stands out with the highest inflationary pressures and little room to ease.

Good investor relations practices call for better debt transparency that supports regular, meaningful debtor-creditor dialogue; Limited access to timely, accurate and clear data can hinder capital flows to developing countries, while improvements in debt transparency are associated with lower borrowing costs and higher sovereign credit ratings; In cases of default, fair debt restructuring requires active information-sharing between debtor and creditors.