The Russian invasion of Ukraine dominated newsflow and asset price moves, with global financial markets plunging on 24 February and remaining highly volatile.
Inflation moved marginally higher in Uganda but fell slightly in Kenya on the back of lower food prices and base effects. Egypt’s trade deficit continues to narrow given the higher price of gas exports, while remittances remain strong.
Asia appears to be relatively well insulated overall from the war in Ukraine, but higher oil prices will weigh on current accounts across the region, given most are net oil importers. The tourism outlook for Thailand turned particularly positive over February.
Upside inflation surprises continued into February. In Peru, political turmoil resulted in a cabinet shake-up, including the appointment of a new minister of finance who is a technocrat with previous experience. Argentina reached an agreement with the IMF (yet to be approved by Congress).
Central and Eastern Europe
News of Russia’s invasion of Ukraine weighed on currencies in the region, putting additional pressure on central banks to increase interest rates as they tackle inflation. Inflation rose above expectations in Hungary; the central bank again increased rates by 50bps, but strengthened its hawkish rhetoric.
Rest of Europe, Middle East and Africa (EMEA)
Russian and Ukrainian assets came under severe pressure. Elsewhere, inflation continued to rise in Turkey, with the average figure expected to be 49% this year, while in South Africa, despite the rise in the oil price, the terms of trade improved over February.
EM corporate debt highlights
The backdrop of rising rates and the subsequent abrupt risk-off shift resulted in the JP Morgan CEMBI falling 4.8%, with investment-grade (IG) debt down 4.5% and the high-yield market down 5.3%. Russian and Ukrainian assets drove these market moves.
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