Many frontier markets remain highly vulnerable – especially to oil price weakness – as fixed exchange rates and lack of policy capacity delayed the adjustment. Most vulnerable among the 68 economies we cover are Bahrain (largest fiscal deficit), Oman, Tunisia, Mozambique (widest current account gap) and Belarus. Nigeria is still the strongest among the Sub-Saharan African markets with sovereign Eurobonds, owing to favourable stock indicators in external and public debt and low domestic private leverage.
Considering the latest weakness in crude prices, we replicate our first chart of the average fundamental ranking specifically for the oil exporters. Bahrain, Gabon and Oman have on average the weakest fundamentals (Chart 3). Venezuela is the weakest among the big index weights. Russia is the oil exporter with the best fundamentals thanks to prudent fiscal policy in the good times and the frontloaded adjustment to the decline in crude prices during 2014-15. Kuwait remains the fundamentally strongest GCC market.
Among the African crude exporters Nigeria remains the relatively strongest thanks to the savings during the period of high oil prices. Moreover, due to import compression and some recovery in crude export volumes the basic balance (including net FDI) is actually back in surplus during the past 12 months (Chart 4). However, this unfortunately has limited the urgency to reform the unsustainable currency regime, in particular.