SYDNEY - EFIC, the Australian Government's export credit agency, is the latest institution to single out the Baltic economies as ripe for a sharp fall.
EFIC chief economist, Roger Donnelly, reports in the agency's latest World Risk Developments newsletter that risk repricing in credit markets has rippled through to emerging economies.
"By and large, emerging markets are well-placed to weather any increased cost or reduced availability of credit. But two types of countries are looking a little vulnerable as the tide turns - those with large external financing needs and those with domestic asset price bubbles," Donnelly says.
Examples of countries cited in the first category include the three Baltic countries 's Estonia, Latvia and Lithuania, all of which have yawning external current account deficits and, in some cases, unsustainable fiscal deficits. Mr Donnelly sees South Africa and Turkey as similar, if less extreme, cases.
"The repricing of risk may have further to go," Mr Donnelly says. "By historical standards, rewards for emerging market risk-taking are near all-time lows."
EFIC provides finance and insurance facilities to Australian companies exporting and investing overseas.
