Global Data Pod
Global Data Pod EM Edge: Don’t judge a book by its cover
Nov 20, 2024
The hosts discuss the potential impacts of a second Trump administration on emerging markets. They highlight vulnerabilities like low diversification and high funding needs, while also noting improvements in fundamentals and FX reserves. Key channels of exposure, including trade, immigration, and funding, are explored. The conversation digs into how global trade dynamics shape economies, the role of remittances in Central America, and the unique factors driving resilience in emerging markets. Insights on coping with economic shocks are also shared, emphasizing future opportunities.
35:23
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Quick takeaways
- Emerging markets face heightened uncertainty due to potential U.S. trade and immigration policies under a second Trump administration, especially those with high trade openness.
- Despite expected financial tightening, improved current account balances and reduced reliance on market funding enhance emerging markets' resilience to external shocks.
Deep dives
Impact of U.S. Election on Emerging Markets
The recent U.S. election results have created a significant shift in the global narrative, particularly impacting emerging markets (EM). The victory of Trump and the Republican party gaining control of Congress may lead to aggressive policies on trade and immigration, leading to heightened uncertainty for EM economies. These less diversified, small open economies face higher funding needs and shallower local capital markets, making them more susceptible to potential shocks. However, many EM economies are better positioned now than during previous crises, with improved current account balances and reduced reliance on market funding.
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