The high interest rate environment is weighing on the emerging markets; medium term prospects for Asia are constructive. In addition to high inflation and high interest rates, political uncertainty is weighing on Latin America's prospects. Uncertainties remain about China’s growth prospects, although the obstacles differ from those of Japan.
Number in focus
The 20th Congress of the Communist Party of China will be held on 16 October. While Xi Jinping will be elected for a third term as the party's general secretary, attention will be focused on the potential successors of Premier Li Keqiang and economic tsar Liu He. Before this pivotal political event, China’s priority has been and still is to ensure stability and, in particular, to avoid a nationwide Covid outbreak at all costs. After the congress, it will thus be important to watch for possible, if at best only gradual, adjustments to the strict zero-Covid strategy.
Chart in focus
All over the world, inflation is shooting far beyond the inflation targets defined by the central banks. Accordingly, the central banks are raising their key interest rates in order to counteract rising inflationary pressure. Latin American countries such as Argentina, Brazil and Chile are among the leaders. Turkey, meanwhile, is dealing with a different situation. Despite the country’s record high inflation rate of over 80%, the central bank continues to lower interest rates, reflecting political pressure from President Erdogan, who is advocating lower interest rates in order to boost investment.