9 September, 2013 18:43 ▪
The Economist: Ukraine is among top 10 emerging markets most vulnerable to a freeze in capital inflows
“A large current-account gap implies lots of net borrowing from abroad, which could presage a credit crunch if funding dries up. A high level of short-term external debt relative to a government’s stock of reserves means an economy lacks the means to tide borrowers through temporary difficulties. Rapid credit growth often signals overstretched firms and overvalued asset prices. A more open financial system may boost growth in the long run, but it also makes it easy for capital to flood out fast,” the publication writes.
The Economist combined these four factors into an index measuring the vulnerability of 26 emerging markets to a capital freeze. “We have used a simple traffic-light system to group the countries. Green denotes economies, including reserve-rich oil states, that are at relatively little risk from a sudden stop. A current-account surplus, a vast hoard of reserves and a closed capital account mean that whatever troubles befall China, they are unlikely to include a panicked flight of capital,” The Economist notes.
“Countries in the red zone are most at risk. South Africa, Ukraine and a clutch of Latin American countries all look vulnerable, but Turkey tops the list,” the article concludes.
- The World Bank: Without urgent reforms, Ukraine's budget and current-account deficits will widen beyond the government’s control
- Another foreign bank to leave Ukraine
- American Chamber of Commerce calls on Ukrainian government to stop discrimination of business
- Ex-Finance Minister Viktor Pynzenyk: The government has spent USD 16bn to support stable hryvnia exchange rate over the past two years
- Expert: the pro-Russian business lobby in Ukraine is today weaker than at the beginning of Yanukovych’s presidency
- EBRD plans hryvnia bonds, swaps and money market deals in Ukraine
- Standard & Poor’s: Ukraine and Turkey are the liquidity squeeze liders
- Fitch revises Ukraine's outlook to negative