Moody’s upgrades outlook for Russia and China but downgrades Turkey

Chinese bottling plantMoody’s Investors Service yesterday revised upwards its macro outlook for Russia and China, but forecast that Turkey would grow less than previously expected. The credit rating agency’s analysts are now predicting that overall growth across the G20 emerging markets will reach 4.4% this year and 5% in 2017. More specifically, they raised their outlook for China’s GDP to 6.6% and 6.3% for 2016 and 2017 respectively and are now predicting that Russia, whose economy shrank 3.7% in 2015 and which is expected to contract again this year, will grow by 2% in 2017 thanks to stronger oil prices and industrial production.
Turkish purgeThe gloomier outlook for Turkey is in line with the agency’s decision to put the country’s debt put on review for a downgrade after last month’s failed coup attempt last month and President Erdogan’s subsequent purge of tens of thousands of people from the military, government and academia.
market volatilityThe overall upward revision stems largely from economic stabilisation in China as well as a recovery in commodity prices and the return of capital flows to emerging markets, the report said. The agency also noted the slower pace of the U.S. Federal Reserve’s interest rate tightening cycle in 2016.
“We’re seeing a certain amount of stabilisation … capital flows seem to be back in a fairly strong way and across regions,” said Madhavi Bokil, Moody’s vice president and senior analyst and one of the authors of the report. “Relative to earlier in the year, financial market volatility has come down, and in the case of emerging markets in general we’re seeing some improvement…..Financial markets that were quite volatile earlier in the year have settled and some of the expectations of Fed rate tightening have been pushed back,” Bokil said. “That’s allowed for some of the external pressures to come off.”
US Republican party candidate Donald TrumpHe also warned however, that it expects the Fed to resume its tightening cycle at the end of the year and pointed out that the most immediate downside risk to the global economic outlook was the U.S. presidential election in November. 

Source: reuters