A very interesting discussion on which BRIC countries will be most affected by the crisis on Linkedin. This view of Larry Cristini, Political Risk Consultant at Eurasia Group is an extremely intelligent answer on the question:
Emerging markets in general can be broken down into two groups:
1) those unable and/or unwilling to respond effectively to the crisis; and
2) those in a stronger position to take action (presumably because of healthy macroeconomics and internal politics before the crisis).
The key is to assess the external drivers of the financial crisis and the domestic political drivers—this determines whether the country has the wherewithal to respond effectively.
China is very much in the latter, in the best position b/c of a strong fiscal position, cheaper oil imports, and a well insulated financial market. A lower GDP to debt ratio allows them to step in with a large stimulus package. Social unrest, although a growing concern as we all know, is unlikely to cause destabilization in the medium term.
Brazil although facing falling growth and inflationary pressures that limit the use of monetary policy, is also in a good position with a falling debt to GDP ration and has a government capable (and able due to widespread support) of creating sound counter-cyclical fiscal policies. A somewhat diversified export base outside of just commodities and an economy somewhat insulated with strong domestic demand eases things. Again a good domestic political situation helps here.
India, dependent on global demand for its tech and outsourcing sectors is in trouble and the government’s fiscal deficit means it doesn’t have the latitude to implement wide-ranging fiscal packages. High unemployment and upcoming elections complicate matters politically.
Russia is in the worst position because of the hit from capital flight last year, falling oil prices, and a heavily indebted corporate sector. The government’s hands are tied here due to the loss of export generated revenue and evaporating credit. Politically, although the government currently has strong support, social unrest is a fear as the economy continues to deteriorate through 2009-2010.