We're on the verge of an emerging market crisis!

It’s been a number of years since the last EM crisis, but make no mistake, the risk today of a classic EM crisis is very high.

The growth slowdown from COVID-19 is a “body blow” to EM, but not the only concern. During the expansionary bull market, many commodity-dependent economies have generated large current account deficits, with imports exceeding exports. The collapse of commodity prices means these trade imbalances are about to skyrocket. Foreign capital flows will no longer be able to subsidize the trade deficit, resulting in a classic EM crisis.