Dollar recession seized a record number of emerging markets


Dollar recession in 2015-2016 will be much more serious than in 1998-1999, when was recorded the previous record, writes in his blog in The Financial Times head of sovereign ratings Agency Fitch’s James McCormack. According to Fitch calculations, the total decline in GDP in dollar terms in 30 of the largest emerging economies last year was 6.6%. The Agency predicts that GDP in dollar terms among developing economies will decline in 2016.

McCormack notes that the fall in GDP in dollar terms was recorded in 23 of 30 developing countries is more than during the crises of 1998 and 2009 (then dollar recession was observed at 16 and 20 States, respectively).

According to the representative of Fitch, there are three reasons for the decrease in dollar GDP — the global strengthening of the dollar, the decline in GDP in local currency and falling commodity prices. All three factors are combined, for example, in Brazil and Russia. The first GDP in dollar terms has declined in 2015 to 27%, in Russia by as much as 35%. In 2016, according to forecasts Fitch, Brazil’s GDP measured in dollars will be equal to the average of 2007 and Russia in 2006. According to the world Bank, GDP in US dollars calculated at current market prices in Brazil in that year reached $1,396 trillion, in Russia ten years ago it was $989,93 billion Thus, Russia on this indicator has fallen on 15-e a place, having risen in a number of regional economies such as Spain, South Korea or Mexico.

McCormack noted, dollar recession managed to avoid those developing economies that are major exporters of raw materials, as well as those whose GDP is in national currency are growing. We are talking about India, the Philippines, and Pakistan. Vietnam and Bangladesh.

The estimates of GDP in US dollars most often are of no practical importance, mainly in macroeconomics uses the GDP at purchasing power parity, which allows you to define the size of the national economy in volume. In 2015, GDP PPP Russia fell 2.9% to $3,473 trillion. According to the forecast of IMF, in 2016 it will be $3,493 trillion.

However, “the more the economy involved in international trade, especially for her important indicators dollar of GDP”, says McCormack. “The reduction of dollar income caused by the depreciation of the national currency and the deterioration of terms of trade is accompanied by a substantial reduction in global purchasing power”, — says the analyst. He also notes that the current situation also exacerbates the burden of external debt.

In October 2015, the international monetary Fund predicted that by the end of the year the global recession in dollar terms will be the largest in history ($3.8 trillion to $73,5 trillion).

In 2016 one of the factors of recession, the dollar — a stronger dollar — will remain in force. As written in early January by Bloomberg, following the results of 2016 will strengthen the dollar against 10 other currencies of developed countries.