A year after the taper tantrum, emerging Asian sovereigns with the biggest external funding needs are generally reducing their degree of external vulnerability, although only modestly in most cases. Fitch projects Sri Lanka (BB-/Stable) will cut its gross external funding requirement (GXFR) the most between 2012 and 2014, relative to its foreign reserves, despite the country’s resilience to tapering-induced stresses in 2013. However, Sri Lanka’s high GXFR remains a credit and rating weakness.
India (BBB-/Stable) is projected to have a lower GXFR than Indonesia (BBB-/Stable) in 2015, and has seen a greater reduction in its funding need. India is likely to have a lower funding need than the average for the 10 biggest non-Asian emerging economies by 2015.
Fitch expects Vietnam will see the biggest projected increase in its GXFR, relative to reserves, although this is not a major credit concern as the country’s funding need is negative, reflecting a strong swing into current-account surplus since 2011. Vietnam is rated B+/Positive.
The chart excludes Mongolia, with a GXFR projected at 249 percent of officia