Emerging markets appear to be sailing in calm waters: spreads on emerging market bonds are at a historical low and inflation appears tamed around the world. But the current state of affairs is no source of comfort to Kenneth Rogoff, Professor of Economics at Harvard University and former IMF Economic Counsellor. Speaking at Georgetown University on January 29, he suggested that spreads may be too narrow for some of the more vulnerable countries, and predicted more emerging market crises in the years ahead.
After a round of snowstorms, like the one that hit Washington, D.C., recently, there is a tendency to want to believe that the worst of winter is over. To Rogoff, a similar mood prevailed at the recent World Economic Forum in Davos, Switzerland, on emerging market debt crises. Many distinguished speakers hoped against hope for the end to debt crises, but there are many reasons, he said, that such a feat may not be within our grasp.