Financial conditions across the emerging world have eased in recent months, as continued policy support from central banks in the developed world has supported risk appetite. This in turn has reduced the immediate threat to emerging economies running large current account deficits. We still think that large external financing requirements are a key source of vulnerability for several EMs (notably Turkey and South Africa) which could be exposed as US interest rates start to move up next year. What’s more, there is a more general risk that the recent calm in financial markets breeds complacency among EM policymakers. But for the emerging world as a whole, we do not expect Fed tightening to trigger systemic problems. Instead, the bigger risks lie closer to home, including China’s frothy property market and rapid credit growth in a number of large EMs, including Brazil.
Become a client to read more
This is premium content that requires an active Capital Economics subscription to view.
Already have an account?
You may already have access to this premium content as part of a paid subscription.
Sign in to read the content in full or get details of how you can access it
Register for free
Sign up for a free account to gain:
- Unlock additional content
- Register for Capital Economics events
- Receive email updates and economist-curated newsletters
- Request a free trial of our services