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May 18, 2018 www.intellinews.com I Page 11
“Yields on two-year local currency bonds of the EMs in our sample rose by an average of about 100bp and currencies fell by 6%-7% against the dollar during the Taper Tantrum. There were similar moves during the sell-off in late 2014, although that was exacerbated by the collapse in oil prices,” IIF said.
The sell off has been made worse by a slowing of growth in EMs and especially in Central and Eastern Europe (CEE), although overall growth remains strong. Romania has already reported a mild slowdown in growth for the first quarter and Russia’s central bank also cut the second quarter outlook for growth to 1.4%.
“The first quarter GDP data from Central Europe should support our view that growth has already
peaked and that the region’s economies will slow gradually over the course of this year,” Capital Economics said in a note.
“In Poland, the pace of expansion appears to have been unchanged from Q4, growing at around 5% y/y. But in Hungary and the Czech Republic, it looks like growth slowed a touch. It appears that the Hungarian economy expanded by around 4.3% y/y, down from 4.9% y/y in Q4, while we think that GDP growth in the Czech Republic softened from 5.5% y/y to 4.5% y/y in the first quarter,” Capital Economics added.
Turkey and Romania, two economies that are showing clear signs of overheating, are likely to experience the sharpest slowdowns in growth, according to the consultant.