Finance Monthly September 2019 Edition

Since the early 1990s, emerging markets have been a key part of investors’ portfolios, as they have been offering strong returns and faster growth. However, global trade tensions, a stronger US dollar and rising interest rates have hit emerging markets hard. Still far from catching up with the developed world, many supposedly emerging markets are developing at a slower pace, which combined with the threat of a global trade war and higher borrowing costs on the rise, has made investors pull in their horns. Emerging markets are the ones feeling the strain and financial panic has been gripping some of the world’s developing economies. With political instability, external imbalances and poor policymaking which has led to full-blown currency crises in the two nations, Turkey and Argentina have been at the centre of an emerging market sell-off last year. But they are not the only emerging economies faced with a currency crisis – according to the EIU, some economies which are already in the danger zone and could suffer from the same currency volatility include Brazil, Mexico and South Africa. If the currency crises in Turkey and Argentina continue and develop into banking crises, analysts predict that investors could abandon emerging markets across the globe. “Market sentiment remains fragile, and pressure on emerging markets as a group could re-emerge if market risk appetite deteriorates further than we currently expect”, the EIU explains. EMERGING MARKETS CRISIS In recent months, the media is constantly flooded with reports on the horrifying environmental risks that the climate crisis the Earth is in the midst of poses, but we’re also only starting to come to grips with the potential economic effects that may come with it. Despite the significant degrees of uncertainty, results of numerous analyses and research vary widely. A US government report from November 2018 raised the prospect that a warmer planet could mean a big hit to GDP. The Stern Review, presented to the British Government in 2006, suggests that this could happen because of climate-related costs such as dealing with increased extreme weather events and stresses to low-lying areas due to sea level rises. These could include the following scenarios: - Decrease in agricultural areas crop yields due to hotter weather and draught. - Rebuilding roads that have been destroyed by flooding caused by rising seas and more frequent hurricanes. - Having to build more efficient power grids because the existing ones are not able to withstand extreme weather conditions. Due to climate change, low-lying, flood-prone areas are currently at a high risk of becoming uninhabitable, or at least uninsurable. Numerous industries across numerous locations could cease to exist and the map of global agriculture is expected to shift. In an attempt to adapt, people might begin moving to areas which will be affected by a warmer climate in a more favourable way. All in all, the economic implications of the greatest environmental threat humanity has ever faced range from massive shifts in geography, demographics and technology – with each one affecting the other. CLIMATE CRISIS 4 5 www.finance-monthly.com FRONT COVER FEATURE - THE 5 THREATS FACING THE GLOBAL ECONOMY 13