Emerging Markets Impacted by 3 Factors

The global economy is being hit by a slowdown in growth, large swings in exchange rates and tumbling commodity prices.

These three factors are often portrayed as separate “shocks” but should really be seen as manifestations of the same maturing financial and economic cycle.

The case for a single interconnected adjustment was made by Jaime Caruana, general manager of the Bank for International Settlements (BIS) on Friday (“Credit, commodities and currencies” BIS, Feb 5).

The BIS, nicknamed the central bankers’ central bank, has long worried about growing indebtedness in the global economy and the links between credit conditions, borrowing and growth.

But Caruana highlighted the rapid increase in indebtedness by private sector, non-financial borrowers in emerging markets.

Private non-financial sector debt in emerging market economies has increased from 75 percent to 125 percent of GDP since 2009.

Borrowing by non-financial companies in emerging markets now represents a higher proportion of GDP than in advanced economies.

via Reuters

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza