MacroScope

Emerging markets: Soft patch or recession?

August 18, 2011

Could the dreaded R word come back to haunt the developing world? A study by Goldman Sachs shows how differently financial markets and surveys are assessing the possibility of a recession in emerging markets.
One part of the Goldman study comprising survey-based leading indicators saw the probability of recession as very low across central and eastern Europe, Middle East and Africa. These give a picture of where each economy currently stands in the cycle. This model found risks to be highest in Turkey and South Africa, with a 38-40 percent possibility of recession in these countries.
On the other hand, financial markets, which have sold off sharply over the past month, signalled a more pessimistic outcome. Goldman says these indicators forecast a 67 percent probability of recession in the Czech Republic and 58 percent in Israel, followed by Poland and Turkey. Unlike the survey, financial data were more positive on South Africa than the others, seeing a relatively low 32 percent recession risk.
Goldman analysts say the recession probabilities signalled by the survey-based indicator jell with its own forecasts of a soft patch followed by a broad sustained recovery for CEEMEA economies.
“The slowdown signalled by the financial indicators appears to go beyond the ‘soft patch’ that we are currently forecasting,” Goldman says, adding: “The key question now is whether or not the market has gone too far in pricing in a more serious economic downturn.”

Comments
One comment so far | RSS Comments RSS

“R” word?? How about the “DEPRESSION” word?? Stupid Obama wants to jump start jobs, but unless you make EXPORTABLE products, the makework “jobs” created are just adding to the DEBT.

We borrow to pay for the huge imbalance of IMPORTS over EXPORTS, thanks to Rich Republican Banksters who have exported our good jobs and sent their illicit loot to offshore and hidden accounts.

They don’t care a fig for the USA, they laugh at the stupid crackers who vote for the RepubliCons.

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