Tough 2016 ahead for emerging markets

By Tim Stewart
 — 1 minute read

Emerging markets will suffer throughout 2016 as developed economies begin to hike interest rates, says JP Morgan.

Speaking on a panel hosted by Kinetic Super, JP Morgan chief economist for Australia and New Zealand Stephen Walters said economies like the US and the UK are "not on intensive care any more".

"There are challenges, but [the US and the UK] don’t need interest rates to be at zero any more," Mr Walters said.


The fact that the US and the UK can afford to start raising interest rates is a sign that those economies are "healing", he said.

"They’re generating jobs, they’re generating activity – and even some inflation down the track," Mr Walters said.

While developed markets will be the 'winners' in 2016, the 'losers' will be countries in the emerging world like Brazil, countries in eastern Europe as well as China, he said.

"[These are countries that] have pretty high debt and also now weaker growth. That’s a pretty bad combination," Mr Walters said.

"Interest rates going up in those major economies will make the challenges for those [emerging market economies] even harder to deal with," he added.

When it comes to Australia, Mr Walters said the outlook is "quite bright" – particularly over the long term.

"My advice to businesses would be to be optimistic and take a glass-half-full approach and start investing for the future," he said.

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