Emerging Markets

In this *Special Report*, we analyze the dollar’s reserve status within the context of geopolitical crosscurrents. In our view, there is more than meets the eye when betting on the end of the dollar’s reserve status.

Global growth will weaken in the coming months, yet monetary authorities worldwide will be reluctant to ease policy. This state of affairs foreshadows a clash between markets and policymakers in the months ahead. China’s recovery is losing steam. The latest divergence between Emerging Asian and LATAM currencies will not last.

EM oil demand remains resilient and will continue to be propelled by global growth this year. Supply management by OPEC 2.0 and production discipline outside the coalition will be maintained, forcing inventories lower. Recent price weakness – largely reflecting political uncertainty – has pulled our 2023 Brent forecast down to $90/bbl (from $95/bbl); our 2024 forecast remains at $115/bbl.

The Turkish presidential election will go to a runoff in two weeks, but President Erdogan outperformed his opinion polls. His party, the incumbent AKP, won a majority in parliament. This outcome rewards Turkey’s inflationary policies and as such reinforces our underweight position in Turkish equities. By contrast, the Thai election reinforces our recommendation to stay overweight Southeast Asia relative to global equities.