Why have EM currency crisis risks stayed so low?

One question frequently asked by clients about the latest refresh of our EM Financial Risk Indicators is why currency crisis risks have remained so low through the energy shock. In part, it reflects shifts in trade related to energy and AI. But the broader picture is that external balance sheets have been improving for some time. And while we do expect currency weakness across EMs over the remainder of the year, the scale of the declines is likely to be modest.