{
  "title": "Employment, Growth and Emerging Markets – IMF F&D",
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  "summary": "Mahmood Pradhan chats with Richard House and David Lubin on the future of emerging markets.",
  "sections": [
    {
      "heading": "Resilience of emerging market assets during COVID-19",
      "content": "- Emerging market assets proved \"remarkably resilient\" over the past year despite pandemic shock.\n- Contributing factors:\n  - Very large liquidity injections from central banks in advanced economies.\n  - Greater policy space in some emerging market economies, including use of unconventional monetary policies previously thought available only to advanced economies.\n  - Increased diversification of the asset class: \"more than 80 countries to choose from\" versus a handful 25 years ago.\n  - Ownership structure shift: \"average ownership of foreigners is about 20 percent, including corporate debt.\"\n  - Larger domestic ownership limits contagion and enhances resilience.\n- Market behavior in 2020:\n  - Eurobond issuance by emerging economy borrowers was some $800 billion for the whole of 2020, \"more than a 10 percent increase over 2019.\"\n  - Recession-induced reductions in current account deficits lowered external financing needs in many emerging economies."
    },
    {
      "heading": "Interest-rate environment and potential risks when yields normalize",
      "content": "- Historical dynamics:\n  - Collapse of US real interest rates starting in late March 2020 pushed capital toward emerging economies.\n  - Rises in US interest rates have been a threat to emerging markets’ capital flows \"since the 1970s.\"\n  - A small recent increase in 10-year US Treasuries \"caused some turbulence.\"\n  - Persistent negative real yields on the 10-year US Treasury were described as \"absurdly low\"; as long as that remains the case, \"the threat of significant capital outflows should be contained.\"\n- Interactions with global growth:\n  - If long-term rates move up because of stronger US growth, emerging economies generally lose more through capital outflows than they gain from increased exports under normal circumstances.\n  - Contemporary global drivers: \"the main driver of global investment trade and commodity prices has not been the United States, but China.\"\n  - Ideal scenario for emerging markets: \"a weaker US, with low interest rates pushing capital toward emerging markets, and a stronger China boosting trade and investment.\"\n  - Policy developments in the United States (e.g., infrastructure plans) could help emerging countries, particularly if China refocuses toward consumption."
    },
    {
      "heading": "Use of unconventional policies and policy space",
      "content": "- Unconventional monetary policy in emerging markets:\n  - Many central banks in emerging markets used unconventional policies; \"every central bank has been unconventional\" compared with only a few years ago.\n  - The narrative that emerging countries cannot do quantitative easing \"is long past.\"\n  - Diversity in approaches: example of India combining expansionary fiscal policy with caps on bond yields; such measures may not be viable in all countries due to potential for \"massive capital outflows.\"\n  - Effectiveness often depends on market confidence in growth potential and capital account openness."
    },
    {
      "heading": "Debt burdens, default risk, and need for assistance",
      "content": "- Debt trends and concerns:\n  - Debt burdens of emerging markets and low-income countries are \"rising to unprecedented levels.\"\n  - Many countries are unlikely to see debt-to-GDP levels return to pre–COVID-19 levels \"for many years.\"\n  - Accumulation of large debt in foreign currency is identified as \"much more dangerous,\" though current indicators (external debt service ratio; debt to foreign exchange reserves ratio) \"don’t look too stretched in historical terms.\"\n  - Low US interest rates help keep debt service costs low.\n  - Comparative historical point: past crises (1980s and 1990s) were linked to lack of dollar assets; in the last 20 years many emerging markets \"made strenuous efforts to accumulate foreign currency reserves.\"\n  - Domestic debt problems may be more serious in some countries; investors and the IMF have \"very little experience\" with domestic-debt crises.\n- Default and restructuring:\n  - Recent defaults/restructurings in Argentina, Ecuador, and Lebanon did not produce contagion.\n  - Some countries facing liquidity or solvency issues will need more assistance from the IMF and \"potential private sector participation in restructurings.\"\n  - Private sector participation is warranted \"when debt is clearly unsustainable.\"\n  - The IMF's \"lending into arrears policy\" (first introduced in the 1980s) and private creditors’ risk assessment responsibilities were highlighted."
    },
    {
      "heading": "ESG (environmental, social, governance) debt issuance opportunities and risks",
      "content": "- Market size and demand:\n  - ESG-compliant borrowing in emerging markets is estimated at $16 billion, \"still only 4 percent of total funds under management in emerging markets.\"\n  - Demand from investors is strong; three-quarters of client meetings discussed ESG strategies.\n- Roles and challenges for the IMF and public sector:\n  - The IMF can help smaller countries get involved and support monitoring and reporting, given its commitment to the UN Sustainable Development Goals.\n  - Suggested IMF roles: help with monitoring and engagement, especially on social and governance aspects; encourage country engagement and better reporting.\n- Risks and caveats:\n  - Money fungibility complicates assurance that proceeds fund stated green/social projects.\n  - ESG ratings are \"highly correlated to per capita GDP,\" raising concern that entrenched ESG-based capital allocation could produce perverse consequences and risk capital flows to lower-income countries.\n  - Values-based investing could lead investors to exert pressure that may not always yield clear benefits and could \"end up perpetuating a situation.\""
    },
    {
      "heading": "Market structure and outlook",
      "content": "- Structural improvements reducing systemic crisis risk:\n  - Pegged exchange rates are largely a thing of the past, reducing likelihood of another \"big systemic emerging markets crisis\" at the sovereign level.\n  - Potential for crises remains at the corporate level in some countries.\n- Private-sector differentiation and investor behavior:\n  - Despite large-scale liquidity support, macro and political drivers \"ultimately drive asset prices.\"\n  - There has been \"reasonable differentiation\" across countries in sovereign credit and foreign exchange.\n  - Portfolio managers are expected to perform proper risk assessments rather than rely on multilateral bailouts.\n\nSource: Employment, Growth and Emerging Markets – IMF F&D\n\n---\n\n Content in this bundle\n\n- الأسواق الصاعدة في حالة تغيير\n  - الأسواق الصاعدة في حالة تغيير (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - الأسواق الصاعدة في حالة تغيير (PDF){rel=\"external\" type=\"application/pdf\"}\n- 动荡不安的新兴市场 - 金融与发展 - 国际货币基金组织季刊 -2021年6月号·第58卷\n  - 动荡不安的新兴市场 - 金融与发展 - 国际货币基金组织季刊 -2021年6月号·第58卷 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - 动荡不安的新兴市场 - 金融与发展 - 国际货币基金组织季刊 -2021年6月号·第58卷 (PDF){rel=\"external\" type=\"application/pdf\"}\n- Emerging Markets in Flux – IMF F&D\n  - Emerging Markets in Flux – IMF F&D (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Emerging Markets in Flux – IMF F&D (PDF){rel=\"external\" type=\"application/pdf\"}\n- Mercados emergentes en cambio constante ● Finanzas y Desarrollo ● Junio de 2021\n  - Mercados emergentes en cambio constante ● Finanzas y Desarrollo ● Junio de 2021 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Mercados emergentes en cambio constante ● Finanzas y Desarrollo ● Junio de 2021 (PDF){rel=\"external\" type=\"application/pdf\"}\n- Emerging Markets in Flux Pradhan House Lubin Fr\n  - Emerging Markets in Flux Pradhan House Lubin Fr (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - Emerging Markets in Flux Pradhan House Lubin Fr (PDF){rel=\"external\" type=\"application/pdf\"}\n- 「変動期の新興市場国」　マムード・プラダン　リチャード・ハウス　デビッド・ルービン, ファイナンス＆ディベロップメント　2021年6月号\n  - 「変動期の新興市場国」　マムード・プラダン　リチャード・ハウス　デビッド・ルービン, ファイナンス＆ディベロップメント　2021年6月号 (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - 「変動期の新興市場国」　マムード・プラダン　リチャード・ハウス　デビッド・ルービン, ファイナンス＆ディベロップメント　2021年6月号 (PDF){rel=\"external\" type=\"application/pdf\"}\n- СТРАНЫ С ФОРМИРУЮЩИМСЯ РЫНКОМ В ПРОЦЕССЕ ИЗМЕНЕНИЙ\n  - СТРАНЫ С ФОРМИРУЮЩИМСЯ РЫНКОМ В ПРОЦЕССЕ ИЗМЕНЕНИЙ (Markdown version){rel=\"alternate\" type=\"text/markdown\"}\n  - СТРАНЫ С ФОРМИРУЮЩИМСЯ РЫНКОМ В ПРОЦЕССЕ ИЗМЕНЕНИЙ (PDF){rel=\"external\" type=\"application/pdf\"}\n\n---\n\nSource: https://www.imf.org/en/publications/fandd/issues/2021/06/emerging-markets-in-flux-pradhan-house-lubin"
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    "Authors: MAHMOOD PRADHAN",
    "Published: June 1, 2021",
    "Emerging market assets proved \"remarkably resilient\" over the past year despite pandemic shock.",
    "Contributing factors:",
    "Market behavior in 2020:",
    "Historical dynamics:",
    "Interactions with global growth:",
    "Unconventional monetary policy in emerging markets:",
    "Debt trends and concerns:",
    "Default and restructuring:",
    "Market size and demand:",
    "Roles and challenges for the IMF and public sector:",
    "Risks and caveats:",
    "Structural improvements reducing systemic crisis risk:",
    "Private-sector differentiation and investor behavior:",
    "**الأسواق الصاعدة في حالة تغيير**",
    "**动荡不安的新兴市场 - 金融与发展 - 国际货币基金组织季刊 -2021年6月号·第58卷**",
    "**Emerging Markets in Flux – IMF F&D**",
    "**Mercados emergentes en cambio constante ● Finanzas y Desarrollo ● Junio de 2021**",
    "**Emerging Markets in Flux Pradhan House Lubin Fr**",
    "**「変動期の新興市場国」　マムード・プラダン　リチャード・ハウス　デビッド・ルービン, ファイナンス＆ディベロップメント　2021年6月号**",
    "**СТРАНЫ С ФОРМИРУЮЩИМСЯ РЫНКОМ В ПРОЦЕССЕ ИЗМЕНЕНИЙ**"
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