This has been a topsy-turvy year for emerging markets. After a coronavirus-induced sudden stop of capital flows in the spring, investors soon returned, encouraged by the dramatic easing by the world’s leading central banks. The worst fears have been avoided. Sovereign defaults remain low by historical standards.
But emerging-market policymakers should not deceive themselves: this crisis has only just begun. The worst is yet to come for emerging market sovereign ratings. More countries are tightening restrictions on movement again. With winter approaching in the northern hemisphere, fears of a second infection wave abound. Global recovery is losing steam. A meaningful pickup in sovereign defaults lurks backstage.Read More…
