Past the Trough
On the economic front, EM activity has continued to rebound, albeit at varying speeds across countries. In China, stronger exports and production growth have confirmed a V-shaped economic recovery. Though consumption has been a weak spot, green shoots are appearing, with data on luxury spending and domestic air travel remarkably up year-on-year.
Conditions in India have been mixed. Various states are keen to get economic activity back on track following a nationwide lockdown and most coronavirus-related restrictions have eased. High-frequency indicators such as fuel consumption, travel and credit-card usage have improved to approach pre-pandemic levels. However, areas such as credit growth have been sluggish, with banks remaining wary of a spike in delinquencies amid an economic slowdown. Daily reported COVID-19 cases and fatalities have continued to grow, though the numbers appear to be plateauing.
Brazil’s economy has shown a post-lockdown bounce. Government spending has been critical in backstopping the economy, and better-than-expected data have triggered upgrades in full-year economic forecasts. After a long struggle with the pandemic, Brazil has started to see the number of new COVID-19 cases decline. Paradoxically, the lack of a strict quarantine to contain the virus initially now makes the probability of another wave of outbreak remote, in our view.