Emerging Markets: External vulnerability – BNP Paribas

In emerging economies, debt of both the public and private sectors has increased over the past ten years, points out Christine Peltier, Research Analyst at BNP Paribas.

Key Quotes

“Asian countries, especially China, face mostly a local-currency debt problem; only Indonesia has registered a rise in its USD-denominated debt (as a percentage of GDP).”

“In contrast, in Latin American countries, Turkey and South Africa, the USD-denominated debt of corporates has increased meaningfully.”

“In Gulf countries, governments have had to issue debt on global bond markets to finance their deficits, which have widened following the 2014-2015 fall in oil prices.”

“Emerging borrowers have benefited largely from the global environment of abundant liquidity and low US interest rates in the years that followed the 2008 crisis.”

“Some countries, especially Turkey, Argentina, Chile, South Africa and Indonesia, posted the most deteriorated USD debt-to-GDP ratios at the end of the first quarter of 2018. This highlights their significant vulnerability to US monetary policy tightening and to the ongoing episode of depreciation of their currencies.”