Emerging Market View: What Our Analysts Are Reading

EM View

Ukraine bonds fell to a record low last week, as the IMF found a $15 billion shortfall in the country’s budget, according to Bloomberg. The Financial Times also reported that Ukraine may need to “double its $17 billion emergency loan ‘within weeks’ to avoid bankruptcy.” So what should multinational companies do?

“MNCs should have a downside 2015 Ukraine plan in place that accounts for the spillover effect of a potential default, especially on the exchange rate,” says FSG’s Head of Research for Europe, the Middle East, and Africa, Martina Bozadzhieva.

Meanwhile in Latin America, Venezuela’s economy is at a cross roads, grappling with falling oil prices, inflation, shortages, and corruption, according to the Financial Times.

“Venezuela’s economy is at the verge of falling into a hyper-inflationary spiral. The government cannot be trusted to successfully implement an economic adjustment even if it was willing to do so. Multinationals should brace themselves for a severe deterioration in operating conditions over the coming months,” says FSG’s Senior Analyst for Latin America Research, Antonio Martinez.

Globally, emerging markets are being hit hard as the strength of the U.S. dollar continues to rise. JP Morgan’s index of global emerging markets currencies reached an all-time low last Monday, dropping to 79.36 for the first time since 2000, according to Business Insider. However, the article continues, “having a weaker currency is not always bad news for emerging markets…it also means more attractive exports for many developing countries.” FSG agrees.

“FSG predicts the stable macro environment of low interest rates, declining commodity prices, and a strong US dollar to persist in 2015,” says Associate Practice Leader for FSG’s Global Analytics, Sam Osborn.

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