Global economic stress weighs on business in EMEA emerging-market economies, Moody’s report

Emerging markets in 2019 are facing slower global growth, shifts in trade policies and geopolitical risks, according to a new Moody’s report.

In the report, Moody’s Investors Service covers a series of analysis of business risks for EMEA emerging-markets in various corporate sectors.

“Partly due to higher policy rates in the US and in anticipation of future monetary policy tightening by the ECB, emerging-market countries suffered volatile capital flows,” says Moody’s Managing Director Marianna Waltz. “As the pace of economic expansion moderates, major central banks will likely offer a more supporting monetary policy environment for emerging-market corporates. We expect that the European Central Bank will start increasing deposit and refinancing rates only in 2020, instead of in the second half of 2019.”

Moody’s says weak or deteriorating macroeconomic environments in South Africa and Turkey will continue to negatively impact consumer confidence. South Africa’s economy continues to be exposed to the impact of slow policy reforms and challenges in the power sector in terms of availability and costs.

Economic growth will continue to support demand for consumer goods in Russia, however, a higher VAT and weak ruble threaten to dampen retail sales. Meanwhile, conditions in Turkey’s consumer sector are likely to remain difficult through 2019 and early 2020, hindered by ongoing macroeconomic weakness, the impact of lira exchange rate volatility, high inflation and policy uncertainty.

“Business conditions are neutral for Russia, driven by the government’s policy on developing domestic infrastructure, but expected to be weaker in South Africa and Turkey through mid-to-late 2020,” says Moody’s Managing Director David Staples.

South Africa’s utilities sector continues to be a source of concern for the economy along with the broader concerns over how to stimulate economic growth. Furthermore, Turkey’s weakening economy suggests challenging business fundamentals for its corporate and infrastructure sector, reflecting high interest rates and, for some, difficulties in accessing credit.