EM dollar recession eclipses 1998-99 in depth | beyondbrics

EM dollar recession eclipses 1998-99 in depth | beyondbrics:

"The strength of the US dollar is the single most important issue of the many facing emerging market (EM) economies. At the same time – and in some cases as a corollary of the dollar’s strength – they are struggling with lower commodity prices, increasing rates of inflation, heightened political and geopolitical risks, greater financial market volatility, large capital outflows and an extended period of weakness in global trade.

It is critical to consider nominal dollar incomes in assessing countries’ relative economic performance and prospects because the dollar continues to dominate the pricing of global commodities, the settlement of international trade, the extension of cross-border credit and the foreign reserve assets held by EM central banks. Although the international roles of several other currencies, including the Chinese renminbi, are expanding, there is no convincing evidence that the dollar’s supremacy is under any immediate threat.

Early 2016 macroeconomic performance does not at first appear to have started as badly, or with as much volatility, as global financial markets – although there are some important exceptions. Time will tell whether markets under pressure are reliably indicating an economic turning ahead, but a closer look at many of the larger EMs reveals that downturns in dollar terms are already well entrenched."



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