INSUBCONTINENT EXCLUSIVE:
Nomura has warned that seven countries - Egypt, Romania, Sri Lanka, Turkey, Czech Republic, Pakistan and Hungary - are now at a high risk of
rise since its last update since May, with the largest increases in the Czech Republic and Brazil.It meant the sum of the scores generated
interest rates to give an overall score.Based on data from 61 different EM currency crises since 1996, Nomura estimates that a score above
100 indicates a 64% chance of a currency crisis in the following 12 months.Egypt, which has already devalued its currency heavily twice this
year and sought an International Monetary Fund (IMF) programme, now generates the worst score at 165.Romania is next on 145 having been
propping up its currency with interventions
Default-stricken Sri Lanka and currency crisis-regular Turkey both generate scores of 138, while the Czech Republic, Pakistan and Hungary
notch 126, 120 and 100 respectively.Nomura also ran the Damocles model on the G7 group of leading economies, with the results showing that
all but Japan now have Damocles scores above the 100 threshold, led by the United States and Britain.EM economies are still more vulnerable
Most have not fully recovered from the COVID-19 pandemic and now face high inflation, limited fiscal space, negative real interest rates, a
The late Professor Rudiger Dornbusch once said, A crisis takes a much longer time coming than you think, and then it happens much faster
This article first appeared/also appeared in https://adaderana.lk
