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Worse Than 2008? Here's What the Emerging Market Numbers Show

(Bloomberg) -- Harvard economist Carmen Reinhart turned heads this week with her comments on emerging markets, saying they’re in worse shape now than during the global financial crisis in 2008.

Her assessment comes at a time when investors are turning more cautious on the asset class -- and downright bearish on markets like Argentina, Indonesia and Turkey. But opinions differ on whether the recent turbulence is just a blip or the start of something bigger. The picture also varies from economy to economy, with some in better shape than others.

Worse Than 2008? Here's What the Emerging Market Numbers Show

Below is a look at how some of the key emerging-market indicators have evolved since 2008.

Current accounts

Healthy current-account balances are the front line of defense for emerging markets. While the group boasted a big current-account surplus in 2008, it now has a small deficit -- in large part due to a significant drop in China’s surplus. But the picture isn’t uniform. Some countries, such as Thailand, are notable for their strong positive balances.

Worse Than 2008? Here's What the Emerging Market Numbers Show

Economic growth

The world economy is enjoying its broadest upswing since 2011, and growth in emerging market and developing economies is tipped to accelerate further before leveling off over the next few years, according to the International Monetary Fund. That’s providing a buffer against headwinds such as rising interest rates, even if growth rates aren’t quite as high as they were on the eve of the global financial crisis.

Worse Than 2008? Here's What the Emerging Market Numbers Show

Debt

Emerging-market governments have borrowed steadily over the past decade amid rock-bottom interest rates. Companies have also binged: U.S. dollar credit to non-bank borrowers in developing countries reached $3.7 trillion at the end of last year, up from $1.5 trillion a decade earlier, according to the Bank for International Settlements.

Worse Than 2008? Here's What the Emerging Market Numbers Show

Currency volatility

The JPMorgan Emerging Market Volatility Index, a measure of currency fluctuations, remains well below levels seen in 2008 despite pockets of turbulence in Argentina and Turkey. China’s yuan stands out for its stability over the past few months.

Worse Than 2008? Here's What the Emerging Market Numbers Show

Equity valuations

The MSCI Emerging Markets Index is trading around 12 times estimated earnings for the next 12 months. While slightly above the historical average, that’s not an extreme reading. The gauge fetched about 15 times projected earnings in 2007, before the following year’s market slump sent the ratio to just under 6.

Worse Than 2008? Here's What the Emerging Market Numbers Show

Bond markets

Yields on emerging market dollar bonds are below their historical average, a sign that investor stress levels are still subdued. The current yield-to-worst reading on the Bloomberg Barclays EM USD Aggregate Index is about 5.6 percent, up from 4.5 percent at the beginning of the year. In 2008, the rate surged from 6.6 percent in January to a high of 14.3 percent in October as investors rushed for the exits.

Worse Than 2008? Here's What the Emerging Market Numbers Show

Foreign-exchange reserves

It’s worth noting again that there’s a lot of variation within the emerging world, and that’s particularly true when it comes to foreign exchange reserves. While China has a massive stockpile, reserves in countries like Argentina and Indonesia are dwindling after their central banks intervened to defend their currencies.

CountryYTD FXCurrent AccountReserves CoverReservesAdequate Level
(%)(% GDP)(%)($ Billion)($ Billion)
Argentina-23.3-5.2825264
Turkey-14.0-5.679108136
Brazil-9.9-1.3156380243
Russia-6.6+3.1279460165
India-5.7-1.8194425219
Philippines-4.4-0.72488132
Poland-3.5-0.413311990
Indonesia-3.5-2.113112596
Hungary-3.1+3.01002828
Chile-2.3-1.31013838
Egypt-0.9-4.01774123
Croatia-0.8+2.61162018
Peru-0.8-1.82946422
Korea-0.8+5.0118398339
Romania-0.7-3.81744727
South Africa-0.5-3.1855059
Mexico+0.4-1.8104178171
Thailand+1.8+8.128321576
Malaysia+2.0+2.888110124
China+2.3+1.214932402179
Colombia+4.4-3.11324836

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