Turkey could be at particular risk: S&P

Frankfurt-London

External liquidity assessment of 40 rated emerging market sovereigns finds those in Europe and the Commonwealth of Independent States, including Turkey, Ukraine and Georgia, significantly exposed if funding conditions deteriorate, according to a note of the U.S. based credit rating agency Standard and Poor’s (S&P) yesterday.

“While our three measures address different elements of external financial vulnerability, some sovereigns register high up on all three lists. Ukraine, Georgia, and Turkey are in the top quintile (top eight) under every measure. Belarus, Bulgaria, Macedonia, Ghana, and Croatia appear in the most exposed quintile in two of the three rankings. At the other extreme, China, Russia, and Angola appear in the strongest quintile against all three measures,” the note, titled ‘Emerging market sovereigns in Europe could be most at risk in a liquidity squeeze’ said.

First of the criteria focuses on a percentage of the sum of current account receipts of a country plus usable foreign exchange reserves. Among 40 emerging economies the agency has rated, the worst figures are of Ukraine, Turkey, Belarus, Bulgaria and Macedonia.

Second criterion ranks the market sovereigns according to approximating vulnerabilities due to the prevalence of short-term external debt. Here the all of the 10 most exposed economies are again in Europe or the CIS, with Belarus topping the list ahead of Ukraine, followed by Macedonia, Bulgaria, Georgia and Turkey. Third criterion ranks the market sovereigns by the current account deficits. By this measure Lebanon and Ghana top the ranking, while South Africa, Tunisia, Turkey and Morocco feature in the top 10.