Our proprietary EM financial risk indicators show that the majority of EMs have been well placed to weather the effects of the energy shock. Our aggregate EM currency crisis risk indicator remains near multi-decade lows, banking sector vulnerabilities have receded slightly, and sovereign debt risks have remained concentrated in a handful of perennial high-risk countries with weak balance sheets.
That said, the energy price shock has exposed some oil-importing countries with large and existing external vulnerabilities, particularly Turkey where FX reserves have fallen and our currency crisis risk indicator has hit a fresh multi-year high. Several EMs are bunching closer around our “high” banking crisis risk threshold. And while sovereign debt risks have generally stabilised in major EMs across Africa and Latin America, widening budget deficits have pushed debt risks higher in parts of Eastern Europe.
We’ll be discussing our latest EM Financial Risk Indicators in an online briefing at 10:00 ET / 15:00 BST on Wednesday 5th August. Register here.
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