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2024 EMsights Olympic Games
As world-class athletes vie for gold medals in Paris, the EMsights Capital Group is hosting its own unique competition where we celebrate standout countries in the emerging markets landscape. Just as athletes strive for excellence, we recognize nations that excel in areas like managing inflation, making decisive policy shifts or showing resilience after unexpected election results. We award gold medals to these performers in the dynamic arena of emerging markets:
Coalition Relay Race: India
In June, Indian Prime Minister Narendra Modi secured re-election for a third five-year term, but his BJP party faced an unexpected setback by winning fewer seats in Parliament. This outcome necessitated reliance on coalition partners to form the government, marking the first time in Modi's decade-long leadership that he lacked full congressional support. Initially, there were concerns that this lack of support might hinder Modi's ability to push through key legislation and maintain fiscal discipline. However, Modi defied expectations by enacting a fiscal budget for the current year that is smaller than anticipated. The new budget, set at 4.9% of GDP, is a reduction from the previously proposed 5.1%. Impressively, Modi managed to achieve this while also accommodating the demands of coalition partners, including funding for state development and an employment scheme aimed at tackling high youth unemployment.
Inflation Archery: Czech Republic
In July, the Czech Republic achieved its 2% inflation target, becoming the first major Central and Eastern European nation to do so, while its regional neighbors continue to grapple with higher inflation rates. The Czech central bank has been proactive in its approach, starting rate hikes earlier and with larger increments compared to its counterparts. The nation is now consistently cutting rates and managing to keep inflation expectations in check.
Synchronized Central Banking: Peru
Among Latin American central banks, the Peruvian central bank has demonstrated notable monetary policy management. Inflation in Peru has fallen to 2%, contrasting sharply with the higher inflation seen in many other countries in the region. The bank has shown prudence throughout the cycle of rate hikes and cuts, maintaining a data-driven approach. Despite the nation’s volatile political environment and frequent changes in presidential administrations, the head of the Peruvian central bank has remained steadfast and effectively managed the country’s monetary policy.
Monetary Policy Gymnastics: Turkey
Earlier in 2024, Turkey adopted a more orthodox monetary policy under a new economic team led by Finance Minister Simsek. This marked a significant shift from the previous low-interest-rate strategy that fueled rampant inflation. Interest rates have risen to 50%, up from just under 20% a year ago. While inflation remains high at over 70%, there are early indications of disinflation beginning. The focus now is on monitoring inflation's trajectory to determine if the combination of tighter rates and streamlined banking regulations will yield enough results to sustain President Erdogan’s confidence in Simsek and the new central bank leadership.
FX Freestyle: Egypt
In the first quarter of 2024, Egypt devalued the pound by 38% in a single day, a policy pivot that unlocked an upsized $8 billion IMF program. This also came on the heels of the Abu Dhabi sovereign wealth fund purchasing land development rights of Ras el Hikma for $35 billion. We believe this pivotal moment may enable Egypt to make incremental progress on its privatization initiatives, aligning more closely with its renewed commitments to the IMF.
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