DM Exposure to EM troubles

“Exposure of DM economies to EM troubles is quite limited – this conclusion applies particularly to the US. (i) US exports are worth 5% of GDP when looking at EM economies broadly and 0.7% when looking at the most affected countries (Argentina, Brazil, Russia, South Africa, Turkey, Indonesia and India). If we assume a 10% drop in overall EM import demand as a result of the recent troubles this would mechanically shave 0.5 percentage points from real GDP growth. But this is close to a worst-case assumption, as it would match the worst point of the very severe Asian crisis of the late 1990s. (ii) US banking exposures are likewise quite small, accounting for 5.5% of total banking assets when looking at EM overall and 1.9% when looking at the most affected countries. (iii) We estimate that EM subsidiaries account for 5.5% of US corporate profits overall and for 1.0% when looking only at the most troubled economies.” (Jan Hatzius, Goldman Sachs)

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