EM sovereign debt distress easing, but not over

The incidence of sovereign debt distress has fallen sharply across the emerging world in the last few months, but that doesn’t rule out the possibility of default in a handful of EMs. Tunisia looks most likely to do so, followed by Argentina and Ecuador, albeit perhaps further down the line. In the larger EMs, sovereign default risks are minimal. But dollar bond spreads look narrow in a few places (particularly in Latin America) where public debt dynamics are set to worsen.