According to recent Reuters polls, global growth will accelerate next year. But, as we warned in our latest newsletter, the International Monetary Fund (IMF) warns that the risk of deflation threatens to derail the improved economic picture.
The IMF is not alone. The chief economist of banking giant HSBC is concerned that inflation may “continue to sink over the next two years.”
This is not good for emerging markets. Inflation is falling in the developed world, while rising in developing countries. This is exactly the opposite of what they need: as their products become more expensive, they lose competitiveness in the global marketplace. One only needs to look at the Asian or Latin American stock market indices in comparison with the US and European counterparts to see how much this is true.
Written by: Raul Elizaldeby