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EM financial risks have eased but not evaporated

Financial risks across the emerging world have eased since the start of the year but, with the Fed’s Jerome Powell all but confirming a higher peak for US rates, there is still scope for EMs with weak balance sheets to get punished. Although current account deficits are generally narrowing, still-large shortfalls make several EMs (such as Colombia, Chile, Romania and Hungary) particularly vulnerable to currency falls. Meanwhile,  sovereign default risks remain acute in Tunisia and Pakistan.

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