That commodity prices are important for emerging markets should not come as a surprise. New research from Fitch Ratings sheds light on just how important they are, however, even though some large EM nations such as China and India are net commodity importers.
“The dramatic fall in commodity prices since mid-2014 . . . has been the single most important factor behind [Fitch’s] wave of 13 EM sovereign rating downgrades in 2015 and record 18 in 2016,” said Ed Parker, head of Europe, Middle East and Africa sovereigns at the US rating agency.
Given that commodity prices, as measured by the S&P Goldman Sachs Commodity index, are up 38 per cent since their mid-January lows, the analysis suggests the future will be brighter for EMs — even if things are likely to get worse before they get better.