Report
It is normal for emerging countries to have external deficits, but these deficits must simply be financed appropriately
Emerging countries have a far lower level of per capita income and capital than OECD countries: it is therefore normal for emerging countries to have a structural external deficit. But it is often asserted that the external deficits of emerging countries are dangerous, because they can trigger balance-of-payments crises. There are therefore two possibilities: Requiring that emerging countries have no external deficit in order to avoid crises; but this would have the consequence of curbing investment and growth in emerging countries; Obtaining better financing for emerging countries, via long-term capital, direct investment, and not via short-term financial capital, to avoid the procyclical nature of capital flows.
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Natixis
Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.
Patrick Artus
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