Pakistan, Sri Lanka, Egypt and Turkey have battled issues with their economies for quite a while now and are still continuing to do so.
But recently Nomura’s Damocles Index has warned 3 other countries of being in the waters and at risk of currency crisis. The countries that have been warned are Czech Republic, Romania and Hungary. After a hold up with the recovery funding from the European Union Hungary is one of the worst performing emerging market currencies this year. Romania and The Czech Republic, have also faced their worst decline in over two decades. As both currencies have declined more than 8% against the dollar.
This data was provided by Nomura Holding, which uses a warning model called Damocles. Damocles is an early warning indicator of the EM exchange rate crisis. Damocles projects its results by using 6 key indicators. If a country has a score above 100 in the Damocles index, then the country has a 64% chance of having a currency crisis within the next 12 months.
With Pakistan and Sri Lanka both having had to face natural disasters which they are still recovering from above the ever present debt of both the countries, it hasn't been a good year for either Pakistan or Sri Lanka.
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A Lot of different reasons are present for a country's currency crisis, but recently the war between Russia and Ukraine has led to a spike in the price of oil among other things. Egypt is one of the countries that is facing major issues because of the current war. Egypt is also facing a currency exchange crisis as it is still trying to recover from the $12 billion dollar debt that it had taken 6 years ago. Turkey on the other hand is facing most of its problems because of the high rate of inflation.
Natural disasters, debt, exports and inflation are some of the main problems that may soon bring Hungary, Romania and the Czech Republic to their knees. That is unless these countries take a step in the right direction and make changes in their economical status.
As for Pakistan, Sri Lanka, Turkey and Egypt, these countries aren't at a position where they can relax either. They also have a long road of changes and recovery ahead of them.
Lets see what the year of 2023 has in stock for these and other countries.
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