External liquidity scorecard: An early warning system for external distress

  • We present an external liquidity scorecard for 40 emerging and frontier markets to use as an early warning system
  • For many emerging markets, this year begins with a larger debt overhang and smaller buffers than the last
  • Vulnerabilities will be heightened over the coming year as the full impact of the Covid crisis makes itself apparent
External liquidity scorecard: An early warning system for external distress

The initial shock of the Covid-19 pandemic has faded, but the recovery will be slow as many countries face second and third waves before the vaccine is rolled out in scale. And, for many emerging markets, this year begins with a larger debt overhang and smaller buffers than the last. So while last year saw a record-breaking six sovereign bond defaults, vulnerabilities will still be heightened over the coming year as the full impact of the Covid crisis makes itself apparent.

With that in mind, we kick off the year with a top-down look at which emerging markets are at the greatest risk of an external liquidity or balance of payments crisis. Sourcing indicators from centralised sources like the IMF and World Bank for availability and comparability across countries, we have developed an “external liquidity scorecard” for 40 emerging and frontier markets that uses 11 variables that we have chosen subjectively for their predictive power or information content.

Subscribe to Tellimer Insights Pro for the scorecard, and our view of the investment implications.


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