9 global events in 2016 that had the biggest impact on emerging markets
TRANSCRIPT
9 GLOBAL EVENTS IN2016 THAT HAD THE
BIGGEST IMPACT ONEMERGING MARKETS
Ping Jiang
PING JIANG
From terrorist attacks to a failed coup that took nearly 200
lives, the nation has faced a tumultuous 2016 unlike any in a
decade.
Turkey's turmoil resulted in massive damage to its economy
and tourism industries. Add to that an invasion of Syria by
the Turkish army, a crackdown on Turkish civil society by
dictatorial leader Recep Tayyip Erdogan, and tensions with
Russia--and it's clear that the country has a long road to
economic recovery.
THE TURKISHCOUP
#9
After a long impeachment process, Dilma Rousseff is out of
office, and the Brazilian economy has fallen into depression,
its GDP plummeting 9.7% in the last nine quarters. As a sign
of this trouble, the nation has also been downgraded to
"negative" by credit rating agency Standard & Poor's.
Compounding matters, Brazil’s slump is tied to China’s
diminishing need for Brazilian exports, especially
agricultural goods and raw materials. As China is Brazil’s
largest trading partner, this has worsened the crisis, leading
to a shrinking Real.
BRAZILIANEXPORTS ANDCHINA 'S SLUMP
#8
In December 2015, the Fed raised their interest rates for the
first time in nearly a decade, intending to stabilize inflation
that could threaten a recovering economy. They raised
interest rates again in December 2016.
After the announcement, emerging markets reacted
differently than expected. Many benefited from the move,
among them India. The head of The Reserve Bank of India
claimed that it has helped “take a little bit of pressure off.”
Other nations, like Mexico, felt differently. Combined with
their recent internal financial struggles and anti-Mexico
rhetoric, the peso hit an all-time low in early 2016.
FED RAISINGINTEREST RATES
#7
In June 2014, oil prices reached $115, and global trade saw its
share of winners and losers. In February 2016, oil fell below
$35 a barrel. Emerging market economies now find
themselves in the latter camp, given the export-centric
nature of their economies. Oxford economics have resulted
in seven other nations teetering in the red zone, among
them Nigeria, Iraq, and Angola.
DROPPINGGLOBAL OILPRICES
#6
On 19 December 2016, a truck was deliberately driven into
the Christmas market on one of Berlin's busiest roads. The
terrorist attack, reminiscent of an earlier event in Nice,
France, left 12 dead and 56 injured.
In its aftermath, Germany's open-door refugee policy and
strong economy (it is one of the few Western nations with a
thriving manufacturing sector) is in jeopardy. Tourism is at
a standstill, and the free-trade zone that is the EU is very
much seen now not as a source of economic strength, but as
a liability.
GERMANY 'S CHRISTMASMARKET ATTACK
#5
After 129 people were killed in the tragic November 2015
Paris attacks, the economic aftershocks quickly followed.
Emerging economies took the brunt of it; stock prices fell to
a 6-week low in wake of the attacks, according to the MSCI
Emerging Market Index.
The potential lasting effect is the decrease in European
tourism. Following a string of terrorist attacks in previous
years, France is now perceived as a target country for
terrorism. This has global implications, and stock prices for
airlines in Asia have faltered amidst rising uncertainty
regarding French and European tourism. Turkish Airlines
also suffered a 2.6 percent loss.
PARIS ATTACK
#4
In December, Brazil enacted the harshest austerity program
in the world, all in the name of overcoming a budget deficit
and stopping growing inflation.
After ousting Dilma Rousseff, President Michel Temer
implemented a harsh austerity regime, freezing spending
for twenty years. Not only will budgets not be increased, but
education, infrastructure, and healthcare (among others)
won't see more money until 2037--if Brazil's government
can unite long enough to vote down austerity.
Needless to say, the spending cap is a huge obstacle, holding
back not just economic growth, but also crippling Brazil's
weakest inhabitants: its poor and its elderly.
BRAZIL ’S NEWAUSTERITYPROGRAM
#3
Britain’s decision to leave the European Union may well
send ripples through the world economy.
The hardest-hit EU members included southern and
eastern countries like Turkey, Poland, and the Ukraine, all
of which experienced an average initial drop of 4.1% in their
stock markets, while other EU nations saw just a 2.6% drop.
Internationally, Mexico and South Africa were especially
hard-hit, because both nations export heavily to the UK.
BREXIT
#2
With the unexpected victory of president-elect Donald
Trump, currencies were a bit shaken up. Mexico’s peso fell
he most, plunging 9.4% against the dollar. The South African
rand dropped 2.3% against the dollar, and South Korea’s
won went down 1.7%. Foreign exchanges like Taiwan’s Taiex
dropped 3% and the Philippine benchmark PSEi index
dropped 2.6%.
Turkey’s benchmark 10-year government bond increased as
10.71%, the highest level since February. The yield on a
similar bond in South Africa, Indonesia, and Malaysia also
rose slightly. Bond yields rise when their prices fall.
The culprit? Extreme volatility and uncertainty, all
stemming from unclear policy and fear for the future.
Emerging markets are especially susceptible to geopolitical
turmoil.
Still, European markets were less affected, as the Russian,
Polish, Hungarian, and Czech currencies strengthened.
THE OUTCOME OFTHE US ELECTION
# 1
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