Fragile Five and the lesson of 2013
Remember the Fragile Five? India, Brazil, South Africa, Indonesia and Turkey were dangerously close to economic crises almost exactly four years ago. They were badly hit after the US Federal Reserve first hinted that it would soon begin to exit from its extraordinary quantitative easing. One indicator of the fragility of these five countries was high inflation.
The latest inflation numbers for these countries tell an interesting story. South Africa now has its lowest inflation since November 2015. Inflation in Brazil has never been lower in the past 15 years. Price pressures have eased in Indonesia as well. India reported its lowest inflation since the data for the new consumer price index became available. Turkey is the only exception. Its inflation right now is actually higher than where it was just before the taper tantrum almost knocked down the Fragile Five economies.
There are several ways to explain how four of these five countries managed to bring inflation to heel. But what is important is that they seem to have learned the harsh lessons of July 2013.
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