Morgan Stanley’s chief global economist Chetan Ahya has reiterated that 2019 will be a good year for emerging markets (EMs), but flagged the risk of recession remaining in the United States.
"The primary reason for 2019 being a good year for EMs is because the US growth will slow, the US Fed will pause and the dollar will weaken and softer oil prices will help."
According to Ahya, "Rise in oil prices was having an asymmetric impact on US versus EMs because the US net oil imports are about 1 percent of GDP while of Europe and other places it is 2-3 percent of GDP. So this supply driven fall in oil prices is good for EMs."
Talking about the US markets, he said, “We have in our bear case US recession emerging from third quarter of 2019. The risks for that are emerging from two areas. One is in immediate term further escalation of trade war where US decides to put 25 percent tariff on all of the imports from China and a combination of further deterioration of corporate credit risk in the US."
On the Federal Reserve rate trajectory, Ahya said, “We think Powell will still be neutral, very similar to what his last speech was and if he wants to show some dovishness in this speech, he would start to focus on data dependency."
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