Global Macro Service > Research Briefings > Global
After a difficult 2018, the BRICs appear to be finally emerging from their financial winter. According to our latest Financial Conditions Indices (FCIs), Brazil is firmly in positive territory, while Russia is close, and India and China are trending up from end-of-year lows.
Financial conditions in China, which merit close attention because of the country’s importance to the global economy, are still in the negative zone largely due to asset price falls and higher spreads. But we believe they have turned the corner and will continue to improve in the coming months.
Our FCIs for the BRICs — comprising asset prices, money, credit, interest rates and spreads, and FX – on average lead GDP growth by one quarter. Current readings point to more favourable conditions for growth in the BRICs over the first half of 2019.
The most important drivers of FCIs in downturns tend to be hikes in short-term interest rates and widening spreads – often led by external shocks – followed by asset price declines and the slower-moving changes in monetary conditions. This might be one of the reasons BRICs (and EMs in general) struggle to provide the policy support needed when growth slows.
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