Meet the new ‘fragile six’ of global trade

New analysis has identified the six riskiest economies in global trade, based on their exposure to the commodity price slump, the slowdown in China and the US Federal Reserve rate rise.

Researchers at ABN Amro have singled out Brazil, Colombia, Indonesia, Malaysia, South Africa and Turkey as those emerging markets set to feel the heat of the coming months the most.

While the bank has broken down vulnerable economies into those exporting commodities, those with strong “China linkages” and those with fragile external finances, these six have been found to have the weakest aggregate outlooks.

“We are particularly worried about Brazil and Colombia. Both countries are commodity exporters, have weak external fundamentals, while Brazil is also facing political turmoil. In Asia, Indonesia and Malaysia stand out due to their dependency on commodities, trade links with China and external fragilities. Finally, we conclude our list with Turkey and South Africa. Both countries face political challenges, while having to cope with poor external fundamentals,” write economists Arjen van Dijkhuizen and Peter de Bruin.

The list presents a slight twist on the “fragile five” group identified by JP Morgan in 2013 (Colombia, Indonesia, Mexico, South Africa and Turkey), but highlights the growing headwinds facing emerging markets and adds fuel to the suggestion that developed markets are set to resume their role in leading global trade figures...

Overall, ABN Amro bemoans a “tough year for emerging markets”, and while the death knell being sounded among some areas of financial analysis may be premature, sentiment towards emerging economies in 2015 is a far cry from the bushy-tailed optimism found at the turn of the century.

This has been excerpted from the 16 September 2015 edition of Global Trade Review.