Measures to contain the pandemic combined with the drop in oil prices triggered a deep recession. The large twin deficits will narrow significantly in 2021 supported by higher oil and gas prices. We see foreign reserves declining further to levels well below conventional adequacy metrics by 2023.

The output contraction in 2020 was less severe than expected. Fiscal consolidation should improve the medium-term outlook. Demand pressures will likely keep inflation at elevated levels. We think the BNR’s next move will be to tighten its policy stance.

How carbon-reliant are emerging markets? More so than developed markets, but with a lot of variation; Brazil, Turkey, and Chile are most carbon-efficient, with less reliance on energy consumption per unit of GDP; In contrast, the UAE, Saudi Arabia, Singapore, South Africa, and Russia score low on carbon efficiency.

Activity recovered faster than expected in 2020H2, driven mainly by manufacturing. EU funds should support public investment ahead of next year’s parliamentary elections. The MNB’s monetary policy stance is expected to remain largely accommodative in 2021. But we think service sector reopening poses a greater inflation risk than markets predict. Rising inflation expectations and weaker HUF could bring forward the tightening to 2021.

Deep domestic financial systems can help insulate emerging markets from shocks. We survey financial market depth and the availability of long-term funding in EM. Brazil, Chile, Korea, Malaysia, and South Africa stand out compared to their peers. Countries reliant on direct policy support and foreign investors are most vulnerable.

The February 2021 edition of the Insurance Update provides targeted updates on IIF insurance activities and events. 

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

The February U.S. Regulatory Update covers President Biden’s financial regulatory agenda, regulatory agency personnel updates, Fed stress tests, the AML Act of 2020, confirmation hearings on Capitol Hill, and more. 

The kingdom has seen a limited impact of the pandemic due to its low share of services and young population. Non-oil real GDP will grow by 3% in 2021 following a contraction of 2.7% in 2020. The fiscal deficit will narrow to 4% of GDP in 2021, supported by fiscal consolidation and higher oil prices.

Pandemic response helped add $24 trillion to the global debt mountain in 2020, bringing it to a new high of $281 trillion.

Improved market sentiment will allow African sovereigns to return to the market in ‘21. We expect Egypt, Nigeria, Ghana, and South Africa, among others, to issue Eurobonds. However, debt sustainability and liquidity concerns are rising in the context of COVID-19. African countries face Eurobond repayments of close to $100 bn in the coming years. An end to the current low-interest rate environment could make rolling over of debt costly.

The IIF Sustainable Finance Monitor covers key developments in the global sustainable finance agenda. In the February 2021 issue, we discuss how climate policy is taking DC by storm, updates on policy and regulatory developments, and the latest news on market initiatives, frameworks, tools, and research insights. Our Market Snapshot this issue focuses on impact measurement and ESG performance, and we conclude with a summary of key SFWG activities and events.