Videos | February 18, 2014

Will the Asian financial crisis repeat?

Turbulence in emerging equity markets this year has left many investors wondering: could this morph into a repeat of the Asian financial crisis of the 1990s?

In the February 2014 economic update for eZonomics, ING senior economist Martin van Vliet says why – despite warning signs – he thinks this won’t be the case.

History unlikely to repeat
Van Vliet says shares in emerging markets, fell by around 10 percent over the last three months while the developed market index remained essentially flat.
In addition, there were sharp falls in several emerging market currencies, including those in Brazil, Argentina, Turkey and South Africa.
But despite this turbulence, the risk of a new emerging markets led downturn in the global economy “is contained”, he says.
Van Vliet detailed how many emerging market countries, particularly in Asia, are better prepared to cope now as they have lower external debt than in the last Asian financial crisis.
Added to that “more of the debt is denominated in local currency which removes the adverse impact of currency depreciations, which in turn will be less damaging to economies”.

More good news
“The good news is that growth across much of the developed world, notably the US and UK are showing signs of strengthening. Moreover, growth in China -- whose share of global GDP (12%) is larger than that of the other BRICS countries combined (9%) --is holding up well so far.”

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eZonomics team
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