A large wave of sovereign debt risks may come! Beware of exporting to these countries
As my country's export situation picks up, the risk of export earnings has also dropped significantly. What needs to be vigilant is that a very destructive risk is gestating or posing a serious threat to corporate exports.
NO.1┃The epidemic and the solvency of emerging market countries
After the second wave of the new crown epidemic spread in Europe and America, it is currently in the third wave of global spread and spread in emerging markets and developing countries. Emerging economies such as India, Brazil, Mexico, Argentina, and South Africa are all hardest hit by the epidemic.
Affected by factors such as backward medical standards and fragile economic structure, emerging market countries have relatively limited tolerance for the epidemic, and the follow-up prevention and control situation is still not optimistic.
The epidemic has directly impacted the economic growth and foreign trade of emerging economies, brought turmoil in the financial and currency markets, and is triggering and accumulating growing debt risks.
Since 2020, emerging market countries such as Lebanon, Argentina, Ecuador, and Belize have successively experienced sovereign defaults, and the impact of the new crown epidemic on the solvency of emerging market countries has begun to gradually appear.
Sovereign debt risks may not only increase political risks such as foreign control and trade controls, but may also exacerbate commercial risks and pose a serious threat to corporate exports.
NO.2┃The causes of debt risk in emerging market countries
First, the epidemic has impacted the real economy, trade and employment. The economies of emerging market countries are generally characterized by high external dependence, single economic structure, dependence on external demand and bulk commodity trade, and are particularly vulnerable to the impact of the epidemic. The slowdown in global economic and trade growth brought about by the epidemic, the restrictions on the movement of goods and people caused by customs and lockdown measures, and the rise of trade protectionism have not only impacted the domestic production and supply of emerging economies, but also brought export-oriented The economic losses have even hit some emerging market countries that rely on energy.
Second, emerging market countries have less room for fiscal and monetary policies to respond to the new crown epidemic, and they are more dependent on external financing. Before the outbreak of the new crown epidemic, emerging market countries generally faced problems such as high fiscal deficit rates, weak fiscal revenue bases, and greater pressure on interest expenditures, which made their fiscal space to respond to the epidemic more limited; loose monetary policies in emerging market countries are more likely to be triggered Issues such as inflation and currency depreciation have made it more cautious when adopting loose monetary policies to respond to the epidemic; due to the low degree of development of their domestic capital markets, emerging market countries are more dependent on external financing channels, and external financing costs are also affected by the impact of the new crown epidemic. The sharp rise has restricted the ability of emerging market countries to raise large amounts of funds to deal with the new crown epidemic.
Third, under the impact of the new crown epidemic, the sovereign credit of emerging market countries with high levels of foreign debt and insufficient foreign exchange reserves are vulnerable to shocks and face greater risks of default. Before the outbreak of the new crown epidemic, the external debt of emerging market countries was already at a relatively high level. As of the end of 2019, there were 12 emerging market countries with foreign debt levels exceeding 100%. Among them, the foreign debt levels of Seychelles and Mongolia were as high as 200%. The risk is extremely high; although Panama has a high level of foreign debt, because its legal currency is the US dollar, the foreign debt risk is relatively small.