Emerging Market Crisis - A Short But Excellent Summary of Recent Developments
Global Risk Matrix – 2014
Argentina Currency Crisis – Here We Go Again
---
Random
Thoughts on Emerging Market Developments:
China, Global Commodity Markets and Resource Rich Economies -
Many emerging markets (especially those in Africa and
South America) performed well over the past decade, partly as a consequence of a global commodity bull market. Until recently, China’s
strong demand for a range of commodities was a critical driver of growth for countries such as
Brazil, Argentina, Nigeria, South Africa, Indonesia, etc. Of late, the push to rebalance China’s economy is causing a slowdown in demand for various commodities and
negatively impacting many emerging markets. A few resource rich advanced
economies – Australia, in particular – are also getting adversely impacted.
However, if we consider world population distribution (see
table below), we may get a different perspective. Both China and India (which
together account for around 2.6 billion people) have become big importers of
commodities and their domestic populaces actually suffer during periods of very
high commodity prices (note: I am primarily talking about non-agricultural commodities). This
is also true for Pakistan and Bangladesh (which together have more than 300
million people). In fact, India’s problematic current account deficit is almost entirely
driven by crude oil and gold imports. Thus, a correction in commodity markets
may not be all bad news. Not every emerging market benefits from high commodity prices.
Source: World Bank
Source: World Bank