China's Projected Fiscal Easing At Odds With Most Other EMs

Key notable potential developments:

• China: This modest easing is where the skew of risks are perceived to lie. Most descriptions of economic growth are that domestic demand is not on a solid enough footing, in the words of the stats office. Most sell side economists still see fiscal policy as an active part of the mix, consistent with the broad profile the IMF has laid out here. There is also the ultra-long bond issuance, which should be deployed.
• China’s weight in the global economy drags the EM aggregate figure close to neutral despite a range of countries facing tighter fiscal policy.
• Turkey: The return of Mehmet Simsek to the Treasury in 2023 marked a renewed focus on economic normalization and, in particular, a lower inflation rate, a reduction in the current account deficit (CAD) and structural reform. Resultantly, the Treasury have boasted of a $28bln improvement in the CAD off the peak of the deficit in May last year, and project further improvement that is forecast to trim the deficit to below 2.5% of GDP at the end of this year. A reduction in the CAD has a broader target in Turkey: easier FX accumulation. The introduction of currency-protected savings accounts in late 2021 and a push for 'Liraization' helped slow the pace of decline in the TRY, but at a cost. The government now appear to be more oriented around fiscal reform as a longer-term solution for a more harmonious FX regime. Moreover, fiscal tightening - mostly in the form of lower spending - is likely to accelerate moving forward with the local elections now behind us.
• Mexico: There has been a notable loosening of the fiscal position this year ahead of the presidential election in June, with a view that this could be reversed somewhat when the new president comes in.