Economy Watch: Emerging Markets View—May 2024

Our latest forecasts suggest global growth trends are stabilizing after a period of strong pandemic-related volatility. The EM outlook remains more challenging to assess, our Leading Index moved back into ‘Contraction’, while our Coincident index remained in ‘Expansion’. Improving Mature Economies’ composite PMIs point to a stronger global backdrop, while EM indices show more stable growth trends. Our GDP-weighted EM(16) policy rate proxy has peaked but not moved down noticeably; overall, we still see more interest rate cuts than hikes ahead. China’s stronger-than-expected Q1 GDP report raises the likelihood of achieving the 2024 growth target; but there is, still no sign of monetary policy stimulus. Inflation continues to slow in key Latin American economies leaving room for further interest rate cuts to boost economic growth. The Israel/Hamas War has not spilled over into the broader Middle East region. Israel’s economy has been hit hard, but MENA PMIs show no significant impact on activity.