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Asia’s gasping economies run out of breathing space

TOKYO – It’s beginning to feel a lot like 2013 in Asian markets again.

That was the year of the notorious “taper tantrum,” when just a whiff of the Federal Reserve scaling back on asset purchases tanked emerging markets everywhere. That triggered a sudden surge in US yields, plunging stocks and pivots to “risk-off” trades that upended all asset classes.

At the time, Morgan Stanley published a “fragile five” list no government wanted to be on. The unfortunate listees were India, Indonesia, Brazil, South Africa and Turkey. This time around, as markets fret over the Fed tapering again, the Philippines would surely be on the fragile list if not other neighbors as Covid-19 fallout deepens.

Yet developing Asia is in harm’s way to a much greater degree in 2021 than it was in 2013. The reason: the dramatic measures governments took to support cratering economies. Debt-to-gross domestic product (GDP) ratios have surged over the last 18 months.