Emerging Markets Feel The Heat

A number of recent economic factors have downgraded the growth outlook in emerging markets such as Brazil, Indonesia, Thailand and Malaysia. Standard & Poor’s Ratings, for example, downgraded Brazil’s credit rating to junk this past week. Currencies such as the Indonesian Rupiah and Malaysian Ringit are at 17-year lows relative to the US Dollar. The Russian rubles fortunes have plunged this year along with the price of oil. Canada, another commodity exporting country, is suffering due to the global oil supply glut as well and has seen manufacturing statistics decline across industries in the most recent reports. The U.S. economy shows positive signals of strength through its employment, GDP growth (nearly 4%) and consumption numbers, but the same cannot be said about the emerging economies. Signs of slowdown in China have raised fears of poor economic output in other emerging economies as these depend on China’s demand of raw materials that they provide. Surging commodity supplies coupled with the low demand from China has also affected prices of raw materials and commodities. Competing on exports against China become tougher with the recent devaluation of the Yuan by the Chinese government by making existing Chinese exporters more competitive. China's growth or contraction in the near future shall have widespread repercussions on the outlook of other emerging economies. -- Karan Magu New York University B.S. Finance and Economics | Class of 2017