The $5 Trillion Emerging Market Debt Issue

There is a $5 trillion issue on emerging market debt, a Goldman Sachs report notes, as it points to a currency mismatch, but don’t worry… yet. Emerging market debt appears large, but don’t get concerned Emerging markets have collectively accumulated roughly $5 trillion of external debt, with $1.3 trillion occurring in China alone. On the surface, the figures “appear remarkably large,” but such concerns are tempered by two factors: (1) when scaled by GDP, they are not meaningfully above their long-term averages for most countries, and (2) most EMs still have sizeable reserves that could be deployed to help cushion…