Emerging Markets

Emerging Markets Financial Risk Monitor

Emerging Markets Financial Risk Monitor

Evergrande & frontier sovereign debt risks build

The combination of large foreign-currency debt burdens, low FX reserves and weakening currencies means that the risk of sovereign defaults in Sri Lanka and Tunisia is growing. Elsewhere, China’s largest property developer, Evergrande, appears to be close to collapse, which would cause large losses for banks and bondholders. Were this to cause stress in the banking sector, the government would ultimately step in to restore stability. Elsewhere, banking sectors in Turkey, India and the UAE are points of concern.

9 September 2021

Emerging Markets Financial Risk Monitor

Debt risks building, but mostly a medium-term concern

Growing political turmoil in Latin America over recent weeks has raised concerns about public debt, though vulnerabilities are most likely to crystallise over the medium term. Meanwhile, EM currency and banking sector risks are largely centred on Turkey, though Indian banks also remain a major cause for concern.

10 June 2021

Emerging Markets Financial Risk Monitor

Bond market jitters unlikely to trigger spate of EM crises

While further market turmoil is a risk over the coming quarters, the likelihood of outright banking, sovereign debt and currency crises among the large EMs is low. More acute vulnerabilities lie in some of the smaller frontier markets.

5 March 2021
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Emerging Markets Financial Risk Monitor

Vaccines don’t eliminate financial risks

Positive vaccine developments have diminished, but not dispelled, financial risks in emerging markets. Brazil and South Africa are still facing slow-burning fiscal crises, while India’s banking sector looks worryingly frail. Elsewhere, despite the recent hawkish shift at the country’s central bank, the Turkish lira – alongside the Argentine peso – remains vulnerable to large falls over the medium term.

3 December 2020

Emerging Markets Financial Risk Monitor

Spate of financial crises avoided, but hangovers loom

Most major EMs have managed to avoid acute balance of payments, banking sector and sovereign debt problems so far this year. But pockets of vulnerability remain. In particular, the risk of another full-blown currency crisis in Turkey is very high. And despite recent debt restructurings, sovereign default risks in Argentina and Ecuador are likely to re-emerge over the medium term.

Emerging Markets Financial Risk Monitor

Coronavirus: the financial risks for EMs

The coronavirus outbreak could expose financial vulnerabilities in China and other EMs if factory and other workplace closures are extended. Within China, property developers are particularly vulnerable to a halt in spending, though the government would probably offer support given the extreme circumstances. Elsewhere, the impact on risk appetite from a deeper downturn in China would hit those EMs with fragile balance sheets, notably Turkey, Argentina, Ukraine and South Africa.

Emerging Markets Financial Risk Monitor

Pockets of risk remain

Economic and financial vulnerabilities are generally low across much of the emerging world, but there are a handful of weak links. Argentina’s sovereign debt vulnerabilities remain high and, whichever direction the new president takes, we think that a large debt write-down will be needed. Elsewhere, banking sector vulnerabilities are high in Turkey, China and Hong Kong.

29 October 2019

Emerging Markets Financial Risk Monitor

Risks concentrated in the usual suspects

Economic and financial vulnerabilities remain low across much of the emerging world. But banking sector vulnerabilities are high in Turkey and China. And we are now explicitly forecasting a sovereign debt default in Argentina. Sovereign debt risks are also acute in Lebanon and some smaller EMs.

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