It has been a rough 12 months for emerging markets that have seen more governments stumble into default, currencies suffer and double-digit losses in stocks and bonds alike – though many investors are optimistic that 2023 could bring some relief.
Below are the events, trends and topics investors expect to shape the outlook for emerging markets next year:
1. HIGH RATES, LOW GROWTH
A slowing pace of interest rate hikes in the United States and other major economies could set the stage for an emerging markets recovery in 2023, with a softer dollar and falling inflation providing much sought relief.
2. CHINA REOPENING
China’s reopening following its COVID-19 lockdowns will be bumpy, but making up nearly a fifth of global gross domestic product the prospect of a sharp upswing at a time of slow global growth is enticing. Analysts expect a sharp pick-up in consumption and investment in the world’s second-largest economy from mid-2023 onwards.
3. WAR IN UKRAINE
Russia’s invasion of Ukraine roiled markets and the world economy – and how the war progresses in 2023 could be no less important, whether that would be a continuation, escalation or progress towards finding a resolution.
4. DEBT REWORKS
A growing list of countries are in debt distress in the wake of COVID-19 and the war in Ukraine: Zambia and Ethiopia are trying to overhaul debt burdens under the Group of 20 Common Framework. Sri Lanka and Ghana defaulted in 2022.