JP Morgan Forecasts Economic Growth to Slow Down

JP Morgan forecasts emerging economies to slow down this quarter. However, Mexico continues to maintain a stable debt while receiving a higher credit rating from Japan’s Credit Agency.

"China’s adherence to its zero-COVID policy, Russia's recession and tightening global financial conditions are set to pull emerging markets (EM) growth sharply lower this quarter," wrote Luis Oganes, Head of Currencies, Commodities and EM Research, and Jonny Goulden, Head of EM Local Markets and Sovereign Debt Strategy, JPMorgan.

Emerging markets are set to “sharply” slow down their economic growth, as countries are affected by China, Russia and the spread of tighter monetary conditions, explained JPMorgan analysts according to Reuters. Analysts also predicted that currencies from emerging market are likely to underperform as the US dollar gains strength.

"EM sovereigns remain at the mercy of rates but cushioned by a combination of front-loaded pain and cleaner technical,” added the analysts. However, on EM corporate credit, they kept a market weight on the CEMBI, stating that "the uncertain market environment and macro risks are mitigated by strong standalone fundamentals and supportive technicals."

Meanwhile, the Japan Credit Rating (JCR) agency upgraded Mexico’s rating outlook from Negative to Stable, arguing that the country’s solid export-oriented industrial base, flexible and agile monetary and exchange rate policies and resilience to external shocks, demonstrated an important leap for Mexico. However, JCR explained that Mexico’s oil industry must be modernized, while highlighting that government policies are worrying because of the uncertainty they generate, as reported by MB.

The International Monetary Fund was also keen on recognizing Mexico’s adequate debt management, as Rogelio Ramirez de la O, Mexico’s Minister of Finance and Public Credit, explained during the G20 Ministers of Finance Meeting. “Mexico was very early in terms of raising interest rates in the face of inflation, and it has done well in that respect as well. So, I would characterize the situation as a fairly robust one,” said Tobias Adrian, Financial Counselor and Director of the Monetary and Capital Markets Department, IMF, via GFSR Press Briefing 2022 IMF Spring Meetings, as reported by MB.