Emerging Market Debt Commentary - May 2020

Global risk sentiment continued to improve over the last month as more economies began the slow process of restarting activity. However, a fundamental reappraisal of EM prospects remains underway given the ongoing uncertainties. The re-opening so far has not been followed by a spike in new COVID-19 cases, reassuring markets that the economic normalization process can continue unimpeded for now. In EM, certain regions like Asia (notably China and Korea) and Emerging Europe appear to have controlled the virus relatively well.

In contrast, much of Latin America, Africa and India are further behind and are continuing to try to control their outbreaks; recoveries and moves to reopen their economies are far more tentative. As policy support remains in place, with central banks ready to act if needed, major economies continue to increase their fiscal response. Although uncertainty regarding the pandemic remains elevated, there has been some early improvement in EM asset performance in May.