Goldman highlights EM risks from Greece

Won’t anyone think of emerging Asian exports? Well, Goldman has. The downside risks are “considerable”, it says.

The bank reiterates that it doesn’t see a Greek exit from the euro as a shoo-in, writes Katie Martin.

Our baseline scenario remains that there will be a default on creditors, including the IMF, although we still expect Greece to remain in the Euro area even after the default.

Still, be prepared, as the scouts say. And the ripple effects of a Grexit could reach unexpected shores.

Asia would not take a knock from direct financial links, the bank says.

The direct financial exposure of Asian EM countries is rather limited, and less than that of Latin American countries.

But

Asia’s trade exposure to Europe is significant, at around 4% of regional GDP and 16% of exports.

Weaker currencies (the euro, Swedish krona, Hungarian forint, Polish zloty, Czech koruna) and slower growth in Europe amid rising Euro area stress, could weigh on Asian exports. Our hypothetical scenario analysis assuming a 1% decline in Europe (26 European countries) GDP and a 10% depreciation of European currencies suggests potential downside risks to Asian exports of 1.6%, with most downside for India, China, Taiwan and Korea.