EM Vulnerabilities Monitor: a new tool to gauge post-pandemic risks
We present our new EM vulnerabilities monitor to assess strengths and weaknesses across the EM complex. Our monitor is using a straightforward quantitative method : we focus on the build-up of imbalances, highlighting the principal vulnerabilities through time and countries. We do not try to predict the occurrence of a crisis.
EM vulnerabilities have been increasing slightly since 2013. However, the structure of the vulnerabilities has changed. Risks are now stemming from the macro and fiscal sectors rather than from the external sector. EMs appear to be less vulnerable to a rise of core yields than in 2013.
Latin America and Africa present the most significant vulnerabilities in conjunction with weaker external factors and a sharper deterioration of the macro and fiscal environment. Turkey, Brazil, and South Africa are unsurprisingly the countries with the highest level of vulnerabilities.