Renowned financial firm Moody’s Investors Service anticipates a more potent disinflationary trajectory for emerging markets (EMs) compared to their advanced counterparts. This projection comes amid the lessening of food and energy prices, along with a concurrent fortification of EM currencies against the US dollar.
In their newly published Cross-Sector report for Emerging Markets – Global, Moody’s delivers an insightful analysis, acknowledging the fact that inflation is currently either within or in close proximity to central bank targets in most major EMs with inflation-targeting policies. The comprehensive report also postulates a further moderation in price level hikes by the conclusion of 2024.
With coverage spanning across 23 emerging markets, the report shed particular light on sovereigns in the Asia-Pacific (APAC) region, which consistently display lower inflation rates. The levels, identified as being in the low-single digits, are expected to hold steady at these relatively restrained figures throughout the next couple of years.
Digging deeper, the report singled out three nations in particular – China (A1; stable), Malaysia (A3; stable), and Thailand (Baa1; stable). Moody’s projects that these countries will experience year-end inflation rates of 2.0%, 3.0%, and 2.8% respectively in 2023. The forecasting underlines the ongoing trend of controlled inflation within these key economic players.
In the case of Malaysia, the report accentuated the well-managed inflation expectations following a peak at 4.7% in August 2022. Moody’s accredited this phenomenon to the central bank’s agile response to burgeoning global inflationary pressures that emerged in the previous year.
Further, the report highlighted Malaysia’s strategic subsidy program for essential commodities as a potent inflation containment strategy. This initiative insulates the country’s economy from potential volatility resulting from sudden shifts in global commodity prices.
Despite the encouraging outlook for inflation control within these emerging markets, Moody’s did not shy away from addressing the potential challenges that lie ahead. The firm pointed out that tightening global financial conditions and recent banking stresses, particularly those observed in the US (Aaa; stable), are poised to continue influencing the global macroeconomic landscape. This could potentially exert additional pressure on EM sovereigns and their existing domestic challenges.
Wrapping up its assessment, Moody’s offered a balanced perspective on the future growth of emerging markets. “Although we expect inflation to slow across most major EMs, the outlook for growth is more mixed,” the report concluded.
This news story is based on an article originally published by malaymail.com.
