Chart of the Week

Why emerging markets may be less vulnerable than they used to be

Most emerging markets are running current account surpluses, making them less dependent on foreign financing

Emerging markets have been in the headlines lately. After performing strongly for quite a while, markets all of a sudden started to focus on risks again. Elke Speidel-Walz, Chief Economist Emerging Markets at DWS, is not concerned for the overall asset class. In particular, she points at the development in current account balances: Only two of the 20 most important Emerging Market countries#ref-1 run a current account deficit of more than 3% of GDP , as our "Chart of the Week" demonstrates. It is probably not a coincidence that precisely these two countries, Turkey and Argentina, find themselves under pressure, facing a depreciating currency, which in turn forces the central bank to hike rates substantially. Other countries, with sound current account balances, should manage to withstand external headwinds relatively well.

Sources: IMF World Economic Outlook, Deutsche Asset Management Investment GmbH as of 05/28/18

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