Monday, February 10, 2014

Emerging Markets Are not all the Same

"The threat of a full-fledged currency, sovereign-debt, and banking crisis remains low, even in the Fragile Five, for several reasons,"
 "All have flexible exchange rates, a large war chest of reserves to shield against a run on their currencies and banks, and fewer currency mismatches (for example, heavy foreign-currency borrowing to finance investment in local-currency assets). Many also have sounder banking systems, while their public and private debt ratios, though rising, are still low, with little risk of insolvency." Roubini wrote  in a new piece for Project Syndicate.

"Over time, optimism about emerging markets is probably correct," Roubini continued. "Many have sound macroeconomic, financial, and policy fundamentals. Moreover, some of the medium-term fundamentals for most emerging markets, including the fragile ones, remain strong: urbanization, industrialization, catch-up growth from low per capita income, a demographic dividend, the emergence of a more stable middle class, the rise of a consumer society, and the opportunities for faster output gains once structural reforms are implemented."

However, "it is not fair to lump all emerging markets into one basket; differentiation is needed," warned Roubini.

Nouriel Roubini is an American professor of Economics at New York University`s Stern School of Business and chairman of RGE Roubini Global Economics
Related Posts Plugin for WordPress, Blogger...