Saturday, December 21, 2013

The civil unrest in Ukraine may exacerbate the already significant Forex and Debt Risks

The civil unrest in Ukraine triggered by the government's last-minute U-turn on EU integration and movement towards Russia may exacerbate the country's already significant forex and debt risks
"Ukraine's large twin deficits and short-term external debt, inflexible currency and low forex reserves (2.2 months of imports and a third of short-term external debt) make it one of the most vulnerable emerging markets to a currency crisis. This risk has now been exacerbated by the civil unrest triggered by the government’s last-minute U-turn away from the EU integration and towards Russia. Devaluation has so far been avoided mainly due to: (1) positive sentiment of Ukrainian retail depositors, used to depreciation pressure; (2) high costs of hedging for corporates and (3) capital and currency controls. A reversal in sentiment, however, could increase the demand for cash forex and trigger disorderly devaluation in a matter of days," Evghenia Sleptsova, RGE Senior Analyst for Russia and CIS, Country Insights, told Interfax-Ukraine. - via
Nouriel Roubini is an American professor of Economics at New York University`s Stern School of Business and chairman of RGE Roubini Global Economics

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