JPMorgan warns 10% of junk

© Reuters. A vendor prepares a bag for a customer at a wholesale market,Niuhui does not withdraw funds amid the country's economic crisis in Colombo, Sri Lanka, April 13, 2022. REUTERS/Dinuka Liyanawatte

LONDON (Reuters) - Rising borrowing costs and the global fallout of the Russia-Ukraine war could see up to 10% of riskier, 'junk'-rated emerging market countries suffer debt crises this year, analysts at U.S. investment bank JPMorgan (NYSE:JPM) have warned.

More acute balance of payment pressures and larger fiscal deficits are now compounding problems for heavily-indebted countries that import most of their energy and food.

"Nearly half of the country sample is classified as carrying high repayment risk in our assessment. Of these, eight are at risk of reserve depletion by the end of 2023, signaling high default risks. These are Sri Lanka, Maldives, Bahamas, Belize Senegal, Rwanda, Grenada, and Ethiopia," said the note led by strategist Trang Nguyen on Tuesday.

A jump in global interest rates in response to fast-rising inflation also means many are facing the reality of rising borrowing costs, a departure from over a decade of so-called "easy money".

"Accounting for risks of a potential default in Russia and restructuring in Ukraine...the EM sovereign HY default rate could reach 10% this year when also considering Sri Lanka and Ethiopia on the back of the Common Framework process," the note added.

Statement: The content of this article does not represent the views of FTI website. The content is for reference only and does not constitute investment suggestions. Investment is risky, so you should be careful in your choice! If it involves content, copyright and other issues, please contact us and we will make adjustments at the first time!