A monthly monitor of financial and economic conditions in emerging markets, analyzed through our Emerging Markets Financial Conditions Indicator (EM FCI), points to deteriorating financial conditions and rising food and fuel inflation across most emerging markets.
We expect G-20 economies to grow by 6.2% in 2021 after a 3.2% contraction last year. The most immediate risk to our forecasts is the pandemic’s evolution. Looking ahead, unprecedented high levels of public and private debt could lead to debt sustainability challenges if growth and revenue prospects dim.
Prolonged political instability in Afghanistan would result in a large numbers of refugees and potentially increase terrorist activity, raising geopolitical risks in neighbouring countries, particularly Pakistan, Tajikistan and Uzbekistan.
Water scarcity will limit hydroelectric power generation capacity, complicating efforts to achieve clean energy targets. Meanwhile, regional and local governments and water-intensive companies, including mining and beverage companies, will face higher capital spending costs as water stress increases over time.
Utilities in emerging markets are less exposed to carbon transition than their counterparts in advanced economies because they face less regulatory pressure to decarbonize and have less exposure to retirements of coal generating capacity.
Ba-rated and first-time issuers dominated second-quarter issuances as average coupons and tenors dropped to record lows alongside falling interest rates. Proceeds will continue to be directed to supporting companies’ liability management in 2021, but refinancing risk will increase in 2022.
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