- Asia looks relatively healthy vs EM peers, despite China’s structural challenges.
- Taiwan, Vietnam, South Korea, and Indonesia have some of the best scores regionally.
- LatAm, alongside Pakistan, Hungary, Turkiye, and Egypt, have constantly had the worst scores.
- Saudi Arabia, Qatar, UAE, and Russia score well, amid the hydrocarbon windfall in recent years.
- By not capturing geopolitical risks, Saudi Arabia and Taiwan’s resilience is perhaps overstated.
Below is a summary; For detailed heatmaps and charts, please refer to the PDF
Key findings:
EM vulnerability indicators have worsened in recent years, as the cover for foreign obligations, saving-investment balance, and fiscal position have slipped in many countries.
We find Argentina, Brazil, Hungary, Pakistan, Egypt, South Africa, and Turkiye at the bottom of our rankings. Almost all feature weak reserves and cover for foreign obligations, high fiscal deficit and debt, unfavourable saving investment gaps, and some degree of currency misalignment. The weak fundamentals pose FX risks. Most of these currencies have slumped significantly in 2023 and 2024 year-to-date.
EM Asia looks fairly healthy: Taiwan, Vietnam, South Korea, and Indonesia have some of the best scores in the region. Taiwan has consistently led EM rankings, due to high savings-investment surpluses contributing to robust reserves, alongside low government, and external debt, despite high private debt.
China, India, and Malaysia fall near the middle of the EM vulnerability cohort.
Russia continues to rank favourably among EMs, given its low government and external debt, as well as decent savings-investment surplus and reserves cover for external funding needs.
At the better end of the spectrum are other energy exporters, such as Saudi Arabia, Qatar, and UAE. Their macroeconomic positions are strong, with healthy fiscal position, savings-investment surpluses, external buffers, alongside low currency misalignments, helped by the hydrocarbon windfall in recent years.
Saudi Arabia continues to sit near the top of our rankings, thanks to high levels of reserves, cover for foreign obligations, low public debt, stable exchange rate, and a favourable savings-investment gap, despite high private sector debt.
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