Which emerging economies are at greatest risk of overheating?
THIS chart, based on an analysis by The Economist, ranks 27 economies according to their risk of boiling over. We take each economy’s temperature using six different indicators: the inflation rate, the unemployment rate relative to its ten-year average, GDP growth relative to trend, excess credit (the growth in bank lending minus the growth in nominal GDP), real interest rates, and the forecast change in the current-account balance in 2011.
Countries are first graded according to the risk of overheating suggested by each indicator (2=high risk, 1=moderate, 0=low). For example, if the growth in excess credit is more than 5% it scores 2 points, 0-5% 1 point, and below 0% nil. The scores from each indicator are then summed and turned into an overall index; 100 means that an economy is red-hot on all six measures.
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Countries are first graded according to the risk of overheating suggested by each indicator (2=high risk, 1=moderate, 0=low). For example, if the growth in excess credit is more than 5% it scores 2 points, 0-5% 1 point, and below 0% nil. The scores from each indicator are then summed and turned into an overall index; 100 means that an economy is red-hot on all six measures.
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