By James Saft
(Reuters) – Syria today, the taper tomorrow – emerging market policymakers are learning that once the market becomes concerned with a current account deficit, most news is bad news.
Having enjoyed easy funding and massive inflows for much of the post-financial crisis period, the prospect of structurally higher global interest rates has made the world suddenly a much less welcoming place for emerging markets.
Expectations that a U.S-led military strike against Syria would cause oil to spike in cost, driving up current account deficits for non-oil-producing countries, helped spur the latest weakness. And any bit of good U.S. economic news, bringing with it higher chances of a Federal Reserve cutback on bond purchases, have only made it worse.
That’s especially true for those, like India, South Africa and Brazil, that import more than they send abroad and thus must rely on foreign money to fund borrowing needs.
When money was easy and investors entranced by stories of structurally superior growth, those funding needs were easily and cheaply met. Now, not so much, and emerging market currencies have been tumbling and flows of funds reversing rapidly.