These Are The Riskiest Emerging Markets

These Are The Riskiest Emerging Markets

Now that EMs are fully in the public eye, Bank of America has updated its “most important external vulnerability indicators” table for emerging markets. The full table is below – it shows seven indicators for 55 emerging and frontier markets: four of them focus on the stocks of external assets and liabilities (FX reserves; net external position of the banking sector; net international investment position of the economy; and external debt/exports ratio) and three highlight the external funding risk (FX reserves/short-term debt ratio; current account balance; and basic balance = current account balance + FDI).

However for those who don’t have the patience to pull all the numbers and compile a datatable, here is a chart which flags the highest external risk among the 10 most prominent EMs broken down by liquidity (reserves over near-term maturities) on the X-axis and capital flows (current account as % of GDP) on the Y-axis. It should come as no surprise, that Turkey is worst, followed by South Africa, India and Indonesia. China, Korea and Russia have current account surpluses and strong coverage of short-term debt by reserves. Brazil also has high reserve coverage of short-term debt. Mexico and Poland have small current account deficits and healthy reserve coverage, in addition to their IMF Flexible Credit Lines. As for Argentina, forgetabout it.

Full data:

Source: Bank of America

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