Sunday, October 26, 2008

Unhappy days are here again

Unhappy days are here again

Oct 24th 2008

Bad times in emerging markets

WHEN the credit crisis first unfolded, central bankers in many emerging markets were more interested in the price of oil than the price of interbank lending. This detachment from rich countries' woes has now proved illusory. Emerging markets are entering the crisis from very different positions, and are vulnerable in different ways. Their exports will suffer as the global economy slows. The currencies of South Africa, Brazil and Russia have already seen big falls because of plunging commodity prices. Net imports of capital will falter, forcing countries with big deficits to cut spending. Ukraine and Hungary are already turning to the IMF for loans. And countries that are living roughly within their means, such as Russia, have gross liabilities to the rest of the world that are difficult to roll over as dollar lending has dried up.

Illustration by S. Kambayashi