Daily Update: December 13, 2023

Start every business day with our analyses of the most pressing developments affecting markets today, alongside a curated selection of our latest and most important insights on the global economy.

Emerging Markets Confront Macroeconomic Headwinds

Emerging markets are the perpetual bridesmaids of the global economy – always on the verge, but never quite catching the tossed bouquet. For 2024, S&P Global once again anticipates headwinds for the broad swath of emerging market economies. Economic weakness in the world’s largest economies – China, the EU and the US – will negatively impact export dependent economies around the world. But emerging markets are a large and diverse group. Some of our bridesmaids, such as Vietnam, the Philippines and India, are set to have a good year with solid, though diminished, growth prospects. Others, including Argentina, Peru, Columbia and Chile, will be confronting weaker or even negative growth. Most emerging market economies will be somewhere in the middle, confronting macroeconomic weakness, geopolitical tensions and structurally higher interest rates.

Starting with the bright spots, India is set to become the third-largest economy by 2030. According to S&P Global Ratings, India’s GDP growth looks to hold solid at 6.4% in 2024 for a second straight year. The digital and technology sector are looking strong in India, but manufacturing and logistics remain areas of potential improvement. Vietnam has benefited from changing supply chain dynamics and growing geopolitical tensions to increase trade with the US. However, needed investments in power generation capacity and infrastructure may prove more challenging with higher interest rates projected to persist well into 2024.

S&P Global Ratings predicts that the most challenging headwinds for emerging market economies include higher interest rates, which raise refinancing risks, as well as a downturn for advanced economies, geopolitical tensions and the economic impacts of climate change. In an El Niño year, the increasing frequency of natural disasters may intensify. Pakistan’s experience with massive floods in 2023 shows the impact that a natural disaster can have on a country’s economy. Property sector woes in China have also weakened confidence and growth momentum in some emerging market economies that are dependent on exports to China. Geopolitical tensions have had limited macroeconomic effects so far. Oil prices have proven resilient despite the war between Hamas and Israel, and higher grain prices that started with Russia’s invasion of Ukraine appear to have stabilized. However, energy and food prices might rise again if these conflicts expand or if some of the many elections scheduled for 2024 introduce new geopolitical instability.

On the positive side, the increasing adoption of electric vehicles is driving a hunt for key metals that is focused in some emerging markets. Currently, the leaders in mining and processing these metals are mostly emerging markets, including China (copper, cobalt, nickel and lithium), Chile (copper and lithium) and Indonesia (nickel and cobalt). The opportunity for further growth in mining and processing battery metals extends to Chile, Peru, Mexico, Indonesia, Argentina, the Democratic Republic of Congo and the Philippines.

One of the biggest risks to baseline growth, according to S&P Global Ratings, is the soft landing for the US economy. If the soft landing turns unexpectedly hard, there would be strong negative implications for the global economy with outsized effects in emerging markets. 

Today is Wednesday, December 13, 2023, and here is today’s essential intelligence.

Written by Nathan Hunt.

Economy

North American Debt Recoveries May Trend Down For Longer

S&P Global Ratings is seeing an uptick in defaults for North American corporate entities in 2023 amid higher-for-longer policy rates from the Federal Reserve, sticky inflation, uneven economic performance and more cautious capital markets. It expects this to pressure cash flows and profitability, as well as hurt valuations. While a majority of the loan issuances in 2023 were through refinances, not all companies found the appropriate spread windows to refinance their maturity wall.

—Read the report from S&P Global Ratings

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Capital Markets

This Week In Credit: Sifting For 2024 Central Bank Clues

Three out of four defaults last week were due to distressed exchanges, reinforcing their position as the leading driver of corporate defaults in 2023. S&P Global Ratings expects defaults to rise further in 2024, and this week's meetings of the Fed, BoE and ECB, among others, will shed light on central bank thinking. Markets expect no change this month, but the communications on future interest rates are more uncertain. None more so than in the US following last Friday’s unexpectedly strong job numbers and in advance of Tuesday's CPI data.

—Read the report from S&P Global Ratings

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Global Trade

Container Shipping: Overcapacity Will Test Discipline In 2024

In the container shipping industry it isn't only vessels that are roiled by waves. Since 2020, container liners have been buffeted by peaks and troughs in trade volumes starting with a pandemic-driven dip, then an e-commerce-fueled spike and, latterly, another fall (and persistent weakness) triggered by cost-of-living pressures, sluggish consumer demand and excess retail inventories.

—Read the report from S&P Global Ratings

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Sustainability

Forging The Global Energy Transition: An Index For Essential Metals

Look inside the S&P Global Essential Metals Producers Index, a pure-play index that tracks the companies helping the world forge the future of energy innovation.

—Watch the video from S&P Dow Jones Indices

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Energy & Commodities

COP28: Iraq Rejects Fossil Fuels Phasedown, Phaseout

Iraq, OPEC's second-biggest oil producer, will not agree to a phasedown or phaseout of fossil fuels, while it has already begun with steps to reduce emissions, the adviser to Iraq's oil ministry told S&P Global Commodity Insights at the UN Climate Change Conference in Dubai on Dec. 11, one day before talks are supposed to end.

—Read the article from S&P Global Commodity Insights

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Technology & Media

Next in Tech | 145: Ep. 145 - The Big Picture on AI, water and datacenters

Many aspects of technology are interlinked with energy, but there are even more complex interactions that are in play. Our annual Big Picture reports are out and Veronica Retamales Burford and Nick Patience join host Eric Hanselman to explore the connections between water, both its use in datacenters and the issues caused by flooding and drought, energy, with its generation and consumption, and the demands and uses of AI.

—Listen and subscribe to Next in Tech, a podcast from S&P Global Market Intelligence

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