Emerging markets Q4 economic outlook

S&P Global Ratings foresees a positive impact on emerging markets as the United States eases its monetary policy. Among the countries expected to benefit are those with strong economic growth fundamentals, such as Brazil and Vietnam. South Africa is also in focus, with S&P expecting the economy to grow by 0.9 per cent, unchanged from the June forecast, but showing slightly higher growth projections for 2025. Elijah Oliveros-Rosen, Emerging Markets Economist at S&P Global Ratings, highlighted some positive signs in the South African economy during a recent interview on CNBC Africa. He mentioned improvements in data with strong GDP growth, enhanced electricity supply, and a positive reaction to the national coalition. However, Oliveros-Rosen also pointed out the need for progress in logistics infrastructure investment. He highlighted that South Africa's fixed investment to GDP ratio still lags behind pre-pandemic levels and compared to typical emerging markets. Despite these challenges, S&P Global Ratings expects South Africa's growth to reach 1.5% next year, aligning with historical averages. The discussion then turned to the impact of monetary easing, with a focus on the US economy. Oliveros-Rosen noted that the recent strength of the South African RAND has been influenced by market expectations regarding interest rates. S&P's year-end forecast for the RAND stands at 17.20, reflecting current market pricing. The economist highlighted the importance of monitoring US employment and GDP growth trends to assess potential effects on emerging markets. He presented two scenarios related to Federal Reserve actions and their impact on EM currencies and central bank policies. Oliveros-Rosen expressed a preference for the positive scenario where US growth remains strong, which could benefit EM currencies. However, he cautioned that a negative scenario with slower US growth could depreciate EM currencies. The discussion then shifted towards political risk premiums emanating from the US election. Economic implications of trade and fiscal policies following the election were identified as critical factors that could affect EM inflation and interest rates. Oliveros-Rosen emphasized the global significance of the US election outcome and its potential implications for EMs. Lastly, the conversation touched on recent stimulus measures announced by Chinese authorities to support their economy. While these actions were primarily on the monetary side, concerns regarding fiscal stimulus and debt management in China remained. Oliveros-Rosen noted the importance of monitoring any future developments, particularly regarding fiscal announcements that could impact EM forecasts. Overall, S&P Global Ratings remains vigilant in assessing various economic factors and their potential effects on emerging markets, including South Africa.