Friday, September 27, 2013

Emerging markets on the path to a new crisis?

As some key analysts had announced , the Fed postponed any change in its QE program at least up to December, while the USA economy get traction to a more robust pace of recovery , with the unemployment performance closer to a sustainable level .- This decisions meant relief for anxious markets operators, who worry about the consequences of such a change in US monetary policy. Some questions arise about the ability of Emerging economies to get over with it.- A recent article by Satyajit Das (, September 25th), suggest that although some of the critical vulnerabilities for facing external shocks(fixed exchange rates, low foreign exchange reserves , and foreign currency debt ), have been addressed , the fundamentals of Emerging economies do not look strong enough to endure the impact of the expected change in monetary policy stand, on emerging economies (higher interest rate , capital outflow , currency depreciation and foreign reserves loses ),taking into consideration that the IMF is still focused in the EZ own crisis .All recent data (growth performance, Debt level, Current account balances, foreign reserves levels),support the hypothesis of a fragile situation for these economies. However, this weaker stand for emerging economies, also deals with unsolved structural constraints, lasting two stages of economic growth periods, so far : (2000-2008) with China as the growth engine, and (2008-2012), with massive credit availability as the driven force of growth. As a result of this reforms lag, the so called BRIC countries which looked as a new source of global power, is getting closer to be part of those economies which will face troubles arising with the next round of policies for the global recovery.-