About one year later, these countries have done some homework in an attempt to reduce their fragilities. For example, the countries raised interest rates to attract capital inflows as higher interest rates are appealing to global investors, particularly as the Federal Reserve maintained lending rates close to zero for over five years (and US bond yields remained low).

The International Monetary Fund (IMF) provided a brief outlook for three of these five fragile economies.


The government budget deficit of Indonesia is estimated to reach 2.5 percent in 2014 according to the IMF, while the current account deficit is expected to be around 3 percent. The Indonesian government and central bank (Bank Indonesia) are making efforts to curb the current account deficit and combat high inflation. Therefore, it kept the benchmark interest rate (BI rate) at the relatively high level of 7.50 percent. However, the recent presidential election (9 July 2014) has triggered considerable political uncertainties as it remains unknown who has won the election. In 2013, Indonesian economic growth stood at 5.8 percent, roughly similar to the growth rate before the crisis. The country contains a population that numbers almost 250 million people.


According to the IMF, the government budget deficit of Latin America’s largest economy will reach 3.3 percent this year, while the current account deficit is estimated at 3.6 percent. However, more importantly, the IMF detects lack of reforms in Brazil. Although a presidential election is scheduled later this year, the possible re-election of Dilma Rousseff is not expected to change the current situation (marked by high inflation and slowing economic growth). Brazil, with a population of about 200 million people, recorded economic growth at a pace of 2.3 percent in 2013 (before the crisis the pace of economic growth was 5 percent year-on-year).


The government budget deficit of India is expected to reach 7.2 percent and the current account deficit 2.4 percent. Despite these figures, the country is currently lifted by optimistic sentiments as reform-minded Narendra Modi won the election, while the current account deficit has narrowed rapidly. If Modi can deliver what he has been promising, then we can expect spectacular changes in India. In 2013, India’s GDP expanded 4.4 percent, thus having seriously declined from before the crisis (when GDP growth was around 8 percent). India’s population numbers 1.2 billion people.