The Daily Update - Emerging Market Scores

There is an interesting piece from Bloomberg Economics out today which ranks the emerging market economies according to their vulnerability to President Trump’s policies, as they see them. Three major factors are measured and scored. The first is Protectionism Vulnerability, the second Rates Vulnerability and the third Oil Vulnerability. Fifteen countries are scored with South Africa and Thailand coming in the last two places with an overall score of just one and two respectively, whilst in the top two places are Russia with a score of fifteen and Brazil with a score of fourteen.

They looked at the effects due to the American policies regarding the Iran nuclear deal, tariffs on China, and the threats to NAFTA and the impact of rising US interest rates on the economies. In terms of the Iran situation the countries were ranked on net exports of oil production as a share of GDP, on tariffs the outlook for the various economies in regard exports as a share of GDP, and on the rates effect the impact on current accounts and funding costs as the Fed, as widely expected, continues through the next period to raise the funds rate.

Other points we feel should be included are the various countries’ ability to utilise reserves to smooth the impact of all the above factors. China scores twelvth on the chart, but this does not take into account its huge reserves and indeed its ability to move policies very quickly should the need arise. Saudi Arabia scores a nine; this notes the nation’s ability to reduce less costly production of oil and cut costs while utilising their many years of current account surpluses to overcome shorter term hurdles. While high scoring Brazil has very little in the way of reserves should any difficulties be prolonged.

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