Stop Worrying About Emerging Market Current Account Deficits (FE Trustnet)

Jan Dehn, the head of research at Ashmore, recently told FE Trustnet that he believes too much is made of the scale of current account deficits in emerging market economies.

“Too much is made of current accounts, but they are just little red flags to wave if you want to raise fear. It is the favourite subject of investment banks. They can always find a country that has a current account deficit, but the reason they have one is because you have to import capital.”

“The only way you can do this is by having a deficit in your current account, this is mathematics. Every time there is a sell-off, people always point and say there is a deficit in the current account of a country. However, there is very little change in the deficits.”

“Whenever they seem to be getting out of line, they are adjusted very quickly.”

Dehn also says that emerging market economies are far more robust and less exposed to shocks than they have been in the past and that now “it looks like this is a structural story that has much more to do with the gradual improvement of countries that are coming from a low income status.”

To read the whole article, There is no emerging markets crisis, says Mark Mobius, go to the website of FE Trustnet.

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