Crisis Watch:  

see also:  Predictions-for-2009  and credit crisis of 2007

which countries might see crisis in 2009?

Europe watch

" The Turkish lira, Czech koruna and Polish zloty will probably suffer most as investors flee from higher-yielding emerging-market assets, making it hard for those countries to finance their current-account deficits amid an economic slowdown, according to Thomas Stolper, a foreign-exchange analyst at Goldman Sachs in London. "

great review here:  http://www.rgemonitor.com/euro-monitor/255488/eastern_europe_on_crisis_watch

Current Account/GDP

Moody’s Statistical Handbook, November 2008

External Vulnerability Indicator:

*Defined by Moody’s as Short-term External Debt + Currently Maturing Long-Term External Debt +Total Nonresident Deposits Over One Year)/ Official Foreign Exchange

Moody’s Statistical Handbook, November 2008

External Debt

Moody’s Statistical Handbook, November 2008

Currency Mismatches

Source: Fitch Ratings, Emerging Europe’s Current Account Deficits: Mind the Gap!, January 2008

source:  http://www.rgemonitor.com/euro-monitor/255488/eastern_europe_on_crisis_watch\

Eastern Europe ....

Countries such as Hungary, Estonia, Latvia and Turkey have huge current-account deficits and foreign debts.

As foreign capital dried up, GDP fell by 4.6% in Latvia and by 3.5% in Estonia in the year to the third quarter of 2008.

Hungary’s economy is expected to contract in 2009. Turkey may also be heading for trouble. Its debt-service payments due in 2009 amount to 80% of its foreign reserves, the highest ratio of any big emerging economy.

Russia has run current-account surpluses for many years, yet it has also been badly hit by an outflow of capital and a credit freeze. Banks and companies are finding it hard to roll over their foreign debt. Official reserves have fallen by $160 billion, or 25%, since August. As a result of lower oil prices, Russia is likely to run its first current-account and budget deficits in a decade, and its economy may well contract in 2009.

Sudden Stop:

According to the IIF, net private capital flows to the region are projected to fall from an estimated $254 billion in 2008 to $30 billion in 2009. Whether or not this is formally considered a ‘sudden stop’, it will necessitate a very painful adjustment process.

Latin America

Argentina is another matter. Credit-default-swap spreads on its government debt have surged to horrifying levels, signalling that investors see a high risk of default.

Asia

Export-dependent countries:   would normally do well when currencies devalue..but with world demand likely to fall, export dependent countries could suffer disproportionatly.    see our discussion on Exports

South Caucasus

Azerbaijan - big spender, oil dependent...

Central Asia:

http://en.wikipedia.org/wiki/Central_asia

Kazakhstan

Latin America:

Argentina - a mess, but probably ok through 2009 since nationalizing pension system

Mexico - difficult ties to US, but

Ecuador

Venezuela

Regions that should be ok:

Asia has two other advantages. First, as a large net importer of raw materials it will benefit from the plunge in commodity prices, unlike Latin America. And second, with the exception of India, Asian countries have low public-debt-to-GDP ratios, giving them more room for fiscal stimulus than other emerging economies. Such policies take time to work, but after a nasty 2009, Asia is well placed to be the first region in the world to recover.

China, With debts of only 18% of GDP, the government has plenty more room to boost spending.

could go either way...

India: 

A comparison of China with India in any case shows that exports are not the main thing that determines how vulnerable economies are to the global crisis. India’s exports as a share of GDP are much smaller than China’s, so one might expect it to be holding up better. But a big chunk of Indian investment—the main driver of recent growth—has been financed by overseas borrowing or new equity issuance. Both have dried up. The government’s huge budget deficit also limits its room for fiscal easing. On January 2nd India announced its second monetary and fiscal stimulus package within a month, but the extra spending is tiny. Standard Chartered thinks that GDP growth will dip to 5% in 2009, well below its recent 9% pace.

Latin America’s

prospects lie somewhere between those of Asia and emerging Europe. Weak commodity prices could push the region into running a large current-account deficit, just as private-capital inflows decline sharply. Latin America also has less scope for fiscal stimulus than Asia, because many governments (including Argentina and Brazil) used the windfall from higher commodity prices to boost spending rather than cut debt. Goldman Sachs forecasts that Brazil will grow by only 1.5% in 2009, whereas Mexico’s GDP could fall by 0.5% because of its stronger trade links with America.

If international investors continue to shun risk and rich-world governments swamp markets with their own borrowing, it will be hard for emerging-market governments to issue bonds and for banks and firms to roll over debts.

Already in crisis:

Iceland, clearly

In 2008 emerging stockmarkets fell by more than those in the rich world, and financial woes forced countries such as Hungary, Latvia and Pakistan to go cap in hand to the IMF.

IMF proposals...

The IMF has proposed that governments in a position to do so should act together to inject a global fiscal stimulus equivalent to about 2 percent of world GDP—$1.2 trillion.  source: http://www.imf.org/external/pubs/ft/survey/so/2009/NEW012109A.htm 

The IMF has recommended a combination of measures to get the world back on track, including

So far...The IMF has so far committed $47.9 billion in lending to a number of economies affected by the crisis, including Belarus, Hungary, Iceland, Latvia, Pakistan, Serbia, and Ukraine. It announced a precautionary loan for El Salvador this month and an IMF team is also in negotiations with Turkey.

see GloboTrends: fiscal stimulus and crisis recovery 2009 

Does the IMF have enough money?

"Asked if the IMF has sufficient resources to cope with the crisis, Strauss-Kahn said that the Fund had enough money for the immediate future. "If the crisis goes on, which is most probable, then down the road—say six months from now—we will need more money."  Before the crisis erupted, the IMF had around $200 billion in available resources and access to a further $50 billion. Since then, Japan has offered to lend the IMF an additional $100 billion. Strauss-Kahn has said that the IMF may need an extra $150 billion to help emerging markets and low-income countries get through the crisis."   read more here..

see globoTrends page on International Monetary Fund - IMF

IMF loans:

IMF, EU, and World Bank Line Up $25 Billion for Hungary