Odd Lots Emerging Markets Have Never Experienced A Crisis Like This Before
Apr 20, 2020
Brad Setser, a senior fellow at the Council on Foreign Relations, dives into the unprecedented crisis facing emerging markets, which are grappling with domestic health issues and a drying up of dollar access. He discusses vulnerable economies reliant on tourism and exports, and the crucial role of the IMF for support. Setser also tackles the challenges of external debt and currency fluctuations, emphasizing the need for local currency bonds. Additionally, he highlights the necessity for these markets to reassess growth strategies in light of shifting global dynamics.
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Historic EM Crisis
- This economic shock is worse than 2008 or the Asian financial crisis, impacting emerging markets the hardest.
- It's the biggest shock they've faced in 30 years, says Brad Setser.
Perfect Storm for EM
- Emerging markets face a perfect storm of dollar spikes, trade contraction, falling oil prices, and the pandemic.
- These pressures combine to create significant challenges for these vulnerable economies.
IMF's Role
- The IMF lends reserves to countries lacking them, helping manage debt, investor withdrawals, and export shortfalls.
- It offers balance of payment support and can also provide budget finance under certain conditions.