Emerging markets review: India struggles with second wave

The global death toll from Covid-19 exceeded three million during April, according to Johns Hopkins University, and India reported record levels of new Covid-19 cases alongside reports that its health care system was struggling to cope.


  • Fitch affirmed India’s “BBB-“ sovereign rating with a “negative” outlook
  • Brazil’s key Selic interest rate is set to rise
  • Latin American sovereigns have the highest proportion of “negative” outlooks

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The global death toll from Covid-19 exceeded three million during April, according to Johns Hopkins University, and India reported record levels of new Covid-19 cases alongside reports that its health care system was struggling to cope. Nevertheless, credit ratings agency Fitch affirmed India’s “BBB-“ sovereign rating with a “negative” outlook; Fitch believes that, although the second wave may delay India’s recovery, it is unlikely to derail it. Fitch forecasts economic expansion of 12.8% in the current fiscal year, which ends in March 2022, moderating to growth of 5.8% for the following fiscal year. The CNX Nifty Index fell by 0.4% during April.

“China’s economy expanded at a record rate of 18.3%”

The pace of consumer price inflation in Brazil eased slightly during April as fuel costs rose at a slightly slower rate. Having risen by 0.93% between mid-February and mid-March, consumer price inflation posted a month-on-month increase of 0.60%. On an annualised basis, consumer prices rose by 5.52% in the year to mid-March and by 6.17% in the year to mid-April. Brazil’s key Selic interest rate is predicted to rise to 5.5% this year, according to a survey undertaken by the country’s central bank, as the inflation outlook for 2021 climbed to 5%. The Copom – the central bank’s interest-rate-setting committee – is widely expected to increase the Selic rate at its next meeting, having raised it in March by 0.75 percentage points to 2.75%. The Bovespa Index rose by 1.9% during April.

According to Fitch, Latin American sovereigns have the highest proportion of “negative” outlooks – 47% – of all the emerging market regions. Three sovereign issuers – Chile, Panama, and Suriname – have been downgraded since the fourth quarter of 2020; meanwhile, Peru’s outlook was downgraded from “stable” to “negative”. Although the region is expected to benefit from strong growth in China and the US, higher commodity prices and an accommodative external backdrop, it remains vulnerable to the risk of tighter financing conditions, the evolution of the coronavirus, and the success and speed of vaccine programmes.

China’s economy expanded at a record rate of 18.3% during the first three months of 2021, although this substantial jump should be measured in the context of weakness in the same period last year: the country’s economy contracted by 6.8% during the first quarter of 2020 as the pandemic took hold. The Shanghai Composite Index edged 0.1% higher over the month.


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