By Robin Marshall
Concerns about a wave of EM defaults has recently emerged
Some commentators have expressed concern about a wave of Emerging market ((EM)) debt defaults, based on the scale of the Covid-19 shock, declines in commodity prices, the expansion in EM debt since the GFC, the strong US dollar and inadequate public health systems. Recent credit spread widening, particularly in EM dollar debt, reflects these fears.
Chart 1 shows the spread widening has been substantial in US dollar EM, even after recent narrowing on IMF policy proposals. Lower credit spreads on EM local