Most EM currencies have strengthened against the dollar in recent months. Limited external vulnerabilities – our aggregate EM currency crisis risk indicator remains near multi-decade lows – have helped to provide a more supportive backdrop for EM assets. Sovereign debt risks have also continued to decline in a range of countries and regions, notably Africa and more recently in some parts of Latin America.
Still, there are pockets of vulnerability if global investor risk appetite were to sour. We remain concerned about currency risks in Argentina and Egypt. Banking crisis risks have risen from “low” to “moderate” in a larger number of EMs. And fiscal risks remain acute in some frontier markets and in those EMs in Latin America and Central and Eastern Europe running large budget deficits.
To explore the EM financial risk indicators in more detail please visit our interactive dashboard here.
We’ll be discussing EM risk in a 20-minute online Drop-In at 10am EST/3pm BST on Wednesday 6th August. (Register here.)
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