Chart of the Week: Emerging Europe Exports

This week’s chart from Citigroup looks at Emerging Europe’s exposure to the risks posed by Western Europe’s sovereign debt woes.

The European Union is the primary export market for most of the countries of Emerging Europe, so any weakness in the euro makes their products more expensive for EU residents.

The greatest EU exposure, according to Citi’s research, is faced by the Czech Republic – nearly 70 percent of the nation’s GDP is export-dependent, and about 85 percent of its exports go to the EU. Hungary is nearly in the same position.

Citi points out that this exposure may not be as severe as it appears. Much of the export volume from the Czech Republic and Hungary goes to the EU (particularly Germany) as components for finished products that are then exported. The weaker euro would benefit EU exports, which stands to insulates component suppliers from Emerging Europe to some degree.

At the other extreme in the chart above falls Turkey, whose economy is less reliant on exports than the rest of Emerging Europe, and Ukraine, whose top trade partner is Russia.

Citi also says that Emerging Europe on the whole has little risk of the same sort of public-debt contagion that has the EU ailing and vulnerable. The 2008-09 credit crisis hammered Emerging Europe because of the region’s private-sector debt burdens, not its sovereign debt. A possible exception could be Hungary, whose public debt-to-GDP ratio is close to the EU average.

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About Frank Holmes 282 Articles

Affiliation: U.S. Global Investors

Frank Holmes is CEO and chief investment officer of U.S. Global Investors, Inc., which manages a diversified family of mutual funds and hedge funds specializing in natural resources, emerging markets and infrastructure.

The company’s funds have earned more than two dozen Lipper Fund Awards and certificates since 2000. The Global Resources Fund (PSPFX) was Lipper’s top-performing global natural resources fund in 2010. In 2009, the World Precious Minerals Fund (UNWPX) was Lipper’s top-performing gold fund, the second time in four years for that achievement. In addition, both funds received 2007 and 2008 Lipper Fund Awards as the best overall funds in their respective categories.

Mr. Holmes was 2006 mining fund manager of the year for Mining Journal, a leading publication for the global resources industry, and he is co-author of “The Goldwatcher: Demystifying Gold Investing.”

He is also an advisor to the International Crisis Group, which works to resolve global conflict, and the William J. Clinton Foundation on sustainable development in nations with resource-based economies.

Mr. Holmes is a much-sought-after conference speaker and a regular commentator on financial television. He has been profiled by Fortune, Barron’s, The Financial Times and other publications.

Visit: U.S. Global Investors

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