The rapid spread of the Delta variant is triggering new travel restrictions around the world, putting another setback to the tourism sector, which is critical to many emerging markets. To underline it is S&P Global Ratings In the report “Emerging Markets Monthly Highlights: Delta Variant Causes The Summer To End On A Bleak Note” released today.
In some cases, tourist flows since the beginning of the year are even weaker than in 2020. Asian emerging markets are the hardest hit: many of the borders in the area are closed to international travel while several countries struggle with records of new daily COVID-19 cases. Failure to contain the global spread of the pandemic could hamper tourism in other EMs outside Asia as more travel restrictions may be imposed from the countries of origin of tourists. New closures in several EMs also threaten to derail the economic recovery once again, although the impact on GDP of mobility restrictions is now less severe than in previous waves of COVID-19, ”S&P argues.
Risks to the economic outlook could hold back the central banks of emerging countries
On the central bank front, the rating agency stresses that the normalization of monetary policy is still ongoing, but concerns about a potential setback in growth and the decline in inflationary pressures could in some cases reduce the pressure on some central banks of emerging countries. Four emerging countries (Brazil, Chile, Mexico and Russia) raised interest rates over the past month. In Latin America, S&P expects the normalization of monetary policy to continue in the coming months, and that countries that have not started to raise rates, such as Colombia, will begin to do so as early as the next meeting on 30 August.
However, the situation is different in other emerging countries. In Russia, for example, signs of a potential slowdown in inflation and growth could mean the end of the tightening cycle is near. In several Asian EM economies there is even the possibility of monetary easing, given the strong impact of the Delta variant on activity, and the fact that inflation expectations are generally under control.