Emerging markets to stay sluggish for some time: Moody’s

LONDON - Reuters

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The significant slowdown in many emerging market economies is a medium-term trend that could persist for years, a senior Moody’s analyst said on Aug. 18.

Marie Diron, senior vice president at the rating agency, said countries such as Brazil, Turkey and South Africa were all at risk as local political concerns added to broader pressure on developing economies.

“Emerging markets for a range of country-specific factors are growing significantly more slowly than before the global financial crisis. We think that this is a medium-term trend, here to stay for some time,” Diron said in response to questions in the Reuters Global Markets Forum chatroom.

South Africa, Turkey most exposed to Fed rate hike

South Africa and Turkey were the two most exposed to a rise in U.S. interest rates, expected next month or in December, due to their high levels of dollar-denominated debt.

Brazil, which like Turkey is on the lowest rung of the investment grade ladder at Baa3, has political troubles and sells commodities to now stuttering China.

“We forecast a marked recession (around -2 percent) this year, followed by zero growth,” Diron said. “We have also seen business confidence plummet as political and policy uncertainty is high. Investment has fallen abruptly. These factors will likely stay in place for some time.”

She refused, however, to comment on the prospects for either country’s rating.

She saw slower Chinese growth for the rest of the decade. Last week Moody’s said Beijing’s move to loosen its reins on the yuan was credit positive.