Is EM growth due a jab-induced upgrade?
Is EM growth due a jab-induced upgrade?
Emerging market vaccination rates have badly lagged the developed world. Individual countries have struggled to get to grips with the pandemic and in India particularly it remains severe. We are, however, finally getting indications that the situation is improving in some countries (see chart).
We anticipate that developed countries will have mostly procured sufficient supplies by early in the second half of the year. This will allow more to flow to those emerging countries that have been unable or unwilling to secure enough for large or potentially total population vaccinations.
If so, and despite still high cases of Covid-19 across numerous emerging economies, we think both sentiment and growth prospects could improve markedly. As the table shows, over the past few months, consensus growth numbers have moved up modestly for many countries.
We believe the main driver for this has been more robust outlooks for the rest of the world rather than anything specific to any particular EM country. The "raw materials" for better EM growth – fair to cheap currency levels, solid external account balances, and historically high currency reserve levels – are in place. But against this, some fiscal retrenchment and perhaps slightly higher real yields locally will constrain more aggressive forecasts.
As we get closer to any meaningful change in the provision of liquidity by developed countries, it becomes more important that emerging countries shed the worst vestiges of the pandemic as well and can rely on internal growth drivers and sound policy frameworks. That is why the uptick, however modest, in vaccination rates is particularly welcome.
- Brazil: new economy powers new listings resurgence
- Nervous systems: How the world found out it depends on digital infrastructure
- Monthly markets review - April 2021
- Retirement planning? Sorry, we’re too busy watching Netflix
- Covid restrictions tip the eurozone back into recession
- What are sustainability-linked bonds and how do they work?
Important Information: This communication is marketing material. The views and opinions contained herein are those of the author(s) on this page, and may not necessarily represent views expressed or reflected in other Schroders communications, strategies or funds. This material is intended to be for information purposes only and is not intended as promotional material in any respect. The material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. It is not intended to provide and should not be relied on for accounting, legal or tax advice, or investment recommendations. Reliance should not be placed on the views and information in this document when taking individual investment and/or strategic decisions. Past performance is not a reliable indicator of future results. The value of an investment can go down as well as up and is not guaranteed. All investments involve risks including the risk of possible loss of principal. Information herein is believed to be reliable but Schroders does not warrant its completeness or accuracy. Some information quoted was obtained from external sources we consider to be reliable. No responsibility can be accepted for errors of fact obtained from third parties, and this data may change with market conditions. This does not exclude any duty or liability that Schroders has to its customers under any regulatory system. Regions/ sectors shown for illustrative purposes only and should not be viewed as a recommendation to buy/sell. The opinions in this material include some forecasted views. We believe we are basing our expectations and beliefs on reasonable assumptions within the bounds of what we currently know. However, there is no guarantee than any forecasts or opinions will be realised. These views and opinions may change. The content is issued by Schroder Investment Management Limited, 1 London Wall Place, London EC2Y 5AU. Registered No. 1893220 England. Authorised and regulated by the Financial Conduct Authority.