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“Almost all” developing countries now vulnerable to financial crisis: sobering new report

Jesse Griffiths

05 Mar 2015 17:23:38

There are now two types of developing countries, and both have become increasingly vulnerable to financial crises in recent years. This is the main message of an impressive and sobering new report from inter-governmental think tank, the South Centre. The first type looks familiar to students of previous financial crises. They have “bubbles in domestic credit and asset markets” and are heavily dependent on external financing – so changes in exchange rates, or in the opinion of international investors, can spell disaster. The chart below shows that developing economies’ financial assets (that they own overseas) and liabilities (that foreigners own in their countries) have grown rapidly in the past decade. This means, of course, that they are now “closely integrated” into “an inherently ...