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  • Emerging Markets Debt Daily

    Turkey’s Current Account - Cracks Appearing

    Natalia Gurushina, Economist, Emerging Markets Fixed Income
    January 13, 2020

    Turkey’s current account balance slipped into deficit in November after five monthly surpluses in a row. The 12-month running balance is still in the black (estimated 0.4% of GDP), but the trend is clearly changing, as credit expansion is fueling domestic demand and boosting imports. Sizable capital inflows (especially portfolio inflows) is a positive—they more than fully covered November’s current account gap. However, large errors and omissions raise concerns.  

    India’s inflation delivered a nasty surprise. Yearly headline prices rose by whopping 7.35% in December, well above consensus. The surge was mainly due to food prices, and there are signs that it might start reversing in January. But the optics are bad—inflation breached the target range (2-6%) big time. As such, rate cuts should be off the table for now. 

    October brought no respite for Mexico’s gross fixed investments. The yearly contraction deepened to 8.6% and the outlook remains bleak. Reasons are mostly structural (=there is no easy fix), but the on-going decline gives an extra reason/excuse for the central bank to continue easing. And under the right circumstances this might help at the margin


    PMI – Purchasing Managers’ Index: economic indicators derived from monthly surveys of private sector companies; ISM – Institute for Supply Management PMI: ISM releases an index based on more than 400 purchasing and supply managers surveys; both in the manufacturing and non-manufacturing industries; CPI – Consumer Price Index: an index of the variation in prices paid by typical consumers for retail goods and other items; PPI – Producer Price Index: a family of indexes that measures the average change in selling prices received by domestic producers of goods and services over time; PCE inflation – Personal Consumption Expenditures Price Index: one measure of U.S. inflation, tracking the change in prices of goods and services purchased by consumers throughout the economy; MSCI – Morgan Stanley Capital International: an American provider of equity, fixed income, hedge fund stock market indexes, and equity portfolio analysis tools; VIX – CBOE Volatility Index: an index created by the Chicago Board Options Exchange (CBOE), which shows the market's expectation of 30-day volatility. It is constructed using the implied volatilities on S&P 500 index options.; GBI-EM – JP Morgan’s Government Bond Index – Emerging Markets: comprehensive emerging market debt benchmarks that track local currency bonds issued by Emerging market governments.; EMBI – JP Morgan’s Emerging Market Bond Index: JP Morgan's index of dollar-denominated sovereign bonds issued by a selection of emerging market countries; EMBIG - JP Morgan’s Emerging Market Bond Index Global: tracks total returns for traded external debt instruments in emerging markets.

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