Higher commodity prices and the impact on EMs

China’s re-opening will have a significant impact on the rest of the emerging world by lifting commodity prices. That will improve the terms of trade of EM commodity producers, particularly Chile, Peru and the Gulf economies. However, we think that this improvement in incomes is more likely to be saved than spent. Meanwhile, higher oil prices will push inflation up across the emerging world, but only by around 0.2%-pts, and we don’t expect that this will shift EM central banks’ thinking.