Mubasher: Emerging market economies are becoming more vulnerable to external shocks, Moody's Investors Service said in a report.
The Middle East and Africa region on average has the lowest external vulnerability.
Total emerging and frontier market external debt almost tripled to $8.2 trillion by the end of 2015 from $3.0 trillion in 2005. Debt is now growing faster than GDP and faster than foreign exchange reserves, Moody’s said.
Private debt, rather than public debt is directing the growth of debts. Since 2005, private sector external debt has grown at an annual rate of 14.3% compared to 5.9% growth rate for public sector debt.
“Moody's expects that global economic growth will remain sluggish for the medium term and commodity prices will stay low for several years going forward. This will affect foreign exchange revenues and reserve accumulation for commodity exporters. The potential for capital flows to slow, should US interest rates continue to rise, would also exacerbate the debt situation in emerging economies,” Moody’s said.
The region has the lowest external vulnerability among the four regions as measured by external debt to GDP and external debt to reserves.
“The UAE and Qatar represent the largest shares of external debt in the region respectively, followed by South Africa where the debt-to-GDP ratio has grown over the decade,” it added.
External debt to GDP grew to 43% in 2015 from 36% in 2011. Similarly, the average external debt to foreign exchange reserves ratio for the Middle East and Africa leaped to 258% in 2015 from 219% in 2011.
