Despite some signs of improvement, investors need to be mindful of credit stress across EM sovereigns and non-financial corporates.
“In 2020, the real GDP of G20 emerging market countries, excluding China and Turkey, contracted by close to 6% on average,” said Atsi Sheth, managing director at Moody's Investors Service. “EM economic output is recovering this year, but for many emerging markets, it will be 2022 before it matches pre-pandemic levels.”
The new report from Moody's analyses data across EM sovereigns, financial institutions and non-financial corporations, offering comparisons between EM regions and sectors.
At the same time, EM financial conditions are currently hovering around their long term average levels, about a year after they tightened to record levels in March 2020, according to Moody's Financial Conditions Indicator (FCI). However, there are variations across countries, reflecting differences in financial structures, policies and stage of the business cycle.
Based on firm level data, Moody's EM Liquidity Stress Indicator (LSI) reveals slightly better aggregate liquidity metrics for EM non-financial corporations compared with six months ago.
