Emerging Markets / Country Risk
The Emerging Markets team analyses political and economic developments in Asia, Eastern Europe, the Middle East, Africa and Latin America. Our focus is on structural, long-term trends as well as on the importance of emerging markets for global financial markets. As part of Global Risk Analysis we are Deutsche Bank's centre of competence for sovereign risk-related issues.
In focus
Subsidy cuts in the UAE - A model for the GCC?
The announcement of the United Arab Emirates on July 22 that they would deregulate petrol and diesel prices from August 1 caused a minor sensation. It makes the federation of seven emirates the first amongst the Gulf Cooperation Council (GCC) governments to cut politically sensitive fuel subsidies long called for by the IMF and other observers. While subsidy cuts are an important step for fiscal consolidation and economic development in the UAE, the pressure to lift subsidies is even higher in several other GCC countries. However, Gulf monarchies have been reluctant to change their established oil wealth distribution systems which are one of their main policies to maintain social stability. Gulf peers will be monitoring the implementation and public reception of subsidy cuts in the UAE very carefully. If successful, the Emirates’ move might not only serve as a regional role model for economic diversification but also for fiscal reform. Faced with substantially lower oil revenues, GCC peers might see themselves encouraged to follow suit, also as understanding of the local population for energy price deregulation may increase. However, who will follow when and how can be seen as a function of fiscal urgency and political costs.  [more]
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