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A wave of dollar-denominated corporate debt defaults; Middle Eastern conflicts that triggered a surge in political-risk premia; and weak productivity gains that reduced wages, capex and corporate profits. Some suggest these were the economic shocks that shook emerging markets last year. In fact, none of these factors adequately explain why 2015 was the year the investment case for emerging markets unravelled. Simply put, last year was the weakest for global trade since the financial crisis. Weaker exports from emerging markets lay at the heart of their economic fragility last year. It drove foreign investor flight, the deterioration in balance-of-payments positions and the corresponding lack of fiscal and monetary firepower to service foreign debt.
