I am no global macro expert, but I find the survey done by RGE Monitor can be interesting point of reference. For that, I summarized their point of view for all to digest:-
Central Eastern Europe, Baltics, South East Europe, Russia
- Growth in Eastern Europe looks set to slow in line with core Europe.
- While inflation remains above target, central banks in Czech Republic, Hungary and Poland are paying more attention to slowing growth.
- Baltic states have said bye-bye to double digit growth, after booming over the last 7 years.
- A weaker Rouble, heightened political risk, and lower commodity prices have contributed to outflows as many Rouble long bets have been closed.
Middle East and North & South Africa
- In North Africa, record growth rates come along with risk of higher inflation and monetary tightening. Slowing commodity prices and weaker European markets are among key challenges for the region.
- GCC countries will continue to lead the region, supported by large FX reserves and fiscal expansion. Despite various subsidies and price controls, annual inflation is in the double digits even for Saudi Arabia, where inflation has historically ranged from 1-2%.
- South Africa is suffering from rising interest rates and widening in current account deficit – the widest in 26 years and high reliance on portfolio equity flows. The Rand continues to weaken.
Asia
- Growth forecast on downward revision and rising inflation brings down real interest rates into negative territory.
- Exports have taken a hit since mid-2008 as the economic slowdown is spreading from US to other G-7 export markets.
- India, which known to be a domestic demand driven economy, is dealing with twin deficits – fiscal and trade, hence exerting downward pressure on the Rupee. Corporate earnings are at risk due to rising production costs and lending rates.
- China is decelerating for the last four quarters. The authority is selectively stepping away from its monetary tightening, loosening loan curbs and limiting RMB appreciation, and might instead rely on a stimulus package.
Latin America
- The leading economies in the region – Brazil, Mexico, Argentina, Chile, Peru and Colombia are performing well, supported by large current account surpluses.
- The key risk is growth cycle may have peaked with the decrease in commodity prices and the US slowdown.
- The central banks are not done with hiking interest rates and regional conflict between Mexico and Venezuela could fare up again.
2 comments:
U.S. core durable goods orders rose further in July, underscoring that business investment has held up well in face of a domestic recession and tight credit conditions.
Diagnosing the sources of the crisis is clearly essential to assessing the outlook and evaluating remedies. Not surprisingly, most agreed that the crisis originated in excessive leverage and mispriced risk, classic ingredients for a credit boom and bust. Discussions assigned blame broadly to market participants, to regulators, and to monetary policy. But two observations underscore the limits of this collective diagnosis. First is the severity, persistence, and breadth of the financial storm. This suggests that leverage and mispricing was more pervasive, and that the crisis will last longer, than many have imagined.
Second, and in contrast, so far the economic fallout has been mild, even at its US epicenter. All welcome the disinflationary promise of the slowdown, but it remains a promise. As a result, the near-term policy implications still vary: Inflation-wary central banks, like those in Latin America, are still inclined to tighten or, like the ECB, to stay firmly on hold. Fed officials are also on hold after their series of rate cuts, but remain concerned about downside risks to growth as well as potential upside to inflation. Longer-term, the crisis has spawned unanimous resolve to build a stronger regulatory architecture and infrastructure for the financial system. Just what that means and how to achieve it dominated the debates.
The evolution of this crisis is now broadly familiar: The combination of unwarranted leverage — both explicit in debt ratios and embedded in opaque, structured securities — lax underwriting, and a broad mispricing of risk fueled a housing and credit bubble. Losses from the bursting of those bubbles, starting with subprime mortgages, triggered a drying up of liquidity, ongoing dislocations in securitization markets, a delevering and re-intermediation of lenders’ balance sheets, and a scramble to raise capital. Despite aggressive policy action, the uncertain magnitude of the losses and the reduced risk capacity of leveraged lenders have decimated their shareholders and reduced the availability of credit.
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