1. EM Outlook for 2021: A strong start for markets, a strong end for growth. 2021 returns for EM fixed income should be stronger than this year (except for EM corporates), in the 5-6% range, with EM sovereign returns forecast at 5.7% and both EM local markets (in USD terms) and EM corporates at 5.0%. EM growth of 6.8% forecast for 2021 will be a meaningful improvement on the -2.1% contraction estimated for 2020. The incomplete recovery in EM growth and legacy of high debt may prevent a full recovery in EM valuations, but these will still look attractive when compared

to global asset classes. Balancing improving growth with an outlook for normalizing policy support and higher DM rates will be key for EM fixed income asset prices in 2021.

2. EM growth and fiscal outlook: A lasting impact from the pandemic. Virus resurgence has extinguished hopes of a robust rebound to start 2021 and the damage is expected to be lasting, with an end-2021 GDP shortfall in EM ex. China of 5.5% relative to our pre-pandemic projections. Only several of the North Asian economies are expected to recover to our pre-pandemic projections, while Latin America and Southern Asia will suffer larger-than-average shortfalls. We assume a widespread vaccine will be rolled out in most EM countries in 2H21. Hence, a vaccine-led

recovery will not become apparent until late-2021/early-2022. After an unprecedented amount of fiscal stimulus in 2020, most of EM is poised to tighten sharply in 2021. EM low yielders have space for more fiscal accommodation, but risks to financial stability or debt sustainability constrain the

high-yielders. Some will have no choice but to consolidate (Brazil), but for others (India, Indonesia) premature withdrawal of fiscal support could hurt medium-term growth and debt dynamics.