What Are the Fragile Five?

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The Fragile Five are a group of countries that rely heavily on foreign investments for growth. The group that makes up the Fragile Five has shifted over time, but they all have certain traits in common.

Key Takeaways

  • Brazil, India, Indonesia, South Africa, and Turkey were the first countries to be called the Fragile Five.
  • One feature of the Fragile Five is that, in order to survive, the group relies a great deal on a stable U.S. economy.
  • The World Economic Forum compiles a Fragile Five list that considers world peace when ranking countries.

Definition and Examples of the Fragile Five

The "Fragile Five" is a relatively new term in the global market. It was coined in 2013 by a financial analyst at Morgan Stanley to refer to a group of emerging market economies that depend a great deal on foreign investment to finance their growth.

Since then, many other financial firms, such as ratings agency S&P Global, have issued their own rankings. The World Economic Forum also compiles a list of its own, based on standards that involve world peace. When the term was first created, the original Fragile Five countries included Brazil, India, Indonesia, South Africa, and Turkey.

The current Fragile Five, according to Morgan Stanley, are:

  • Colombia
  • Mexico
  • Indonesia
  • South Africa
  • Turkey

In 2017, credit-rating agency S&P Global picked as its Fragile Five a different set of nations: Turkey, Argentina, Pakistan, Egypt, and Qatar. This latter group was chosen because of how these countries were negatively affected by rising interest rates.

The World Economic Forum chose Congo (Democratic Republic), Syria, South Sudan, Somalia, and Yemen as its Fragile Five. It also ranked Venezuela and Brazil as the countries most in decline due to political corruption and reduced services.


Emerging market economies are found in developing countries in a phase of rapid growth and tend to share similar traits, including low labor costs, a growing middle class, increased global trade, debt and inflation, and sometimes unstable currencies.

How the Fragile Five Are Chosen

When Morgan Stanley selected its first Fragile Five in 2013, it was in response to the global economic recovery. The firm scored emerging markets according to these six factors:

  • Current account balance
  • The ratio of foreign exchange reserves to external debt
  • Foreign holdings of government bonds
  • U.S. dollar debt
  • Inflation
  • Real rate differential

The History of the Fragile Five

The 2008 financial crisis took a toll on countries worldwide. As more developed markets (such as the U.S.) were building back up after the crisis, investors began moving money out of the emerging markets and back into the U.S. dollar. These sharp outflows came mainly from Brazil, India, Indonesia, South Africa, and Turkey. The currencies of these nations began to suffer from the draw. The Brazilian real, Indian rupee, Indonesian rupiah, South African rand, and Turkish lira all began to weaken, which in turn made it hard for those nations to finance their account deficits and pay off foreign debt.

The lack of new investment made it impossible to finance many growth projects. That lack fed into a slowdown and made their economies more vulnerable. In 2015, most of these markets suffered ongoing declines. Even more than before, they relied on foreign investment to fulfill their current account deficits. It was like a cycle of debt.

How Countries Have Broken Free from the Fragile Five

India stood out from the other Fragile Five countries in 2015 in that it had a more stable currency, a falling rate of inflation, and a fiscal deficit that was under control. All of these factors made it a much better place to invest in. As a result, in 2017, India dropped off the list. For at least half of that year, India's stocks and currencies performed better than even those of the world's largest economies. Due to changes in its political structure, India is still on the rise as an economic power and is not likely to return to Fragile Five status.


The future of the Fragile Five rests heavily on the stability of the U.S. economy. Should the U.S. dollar weaken, their fortunes could improve.

In 2018, rules around U.S. trade and tariffs began to change. The countries that make up the Fragile Five may continue to adjust as a result. The tariffs put some of the countries that were on Morgan Stanley's first list into a better stance. Indonesia, for instance, fared well from this change. Indonesia is now in a position to become a safe haven for investing during the trade war escalation.

How to Use the Fragile Five When You Invest

If you have been thinking about adding international assets to your portfolio but are worried about the risk, knowledge of the Fragile Five can help. Putting your money into assets that reside in Fragile Five countries carries great risk. If your tolerance for risk is sounding the alarm, you can instead invest in an international exchange-traded fund (ETF). These types of ETFs will spread your money across companies in foreign markets around the world. You can find an ETF that excludes companies from the Fragile Five countries.

There are even country-specific ETFs. For example, if you decide you only want to invest in Chinese companies, you could invest in a China ETF.

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  1. Business Insider. "MORGAN STANLEY PRESENTS: 'The Fragile Five'—The Most Troubled Currencies In Emerging Markets."

  2. Fidelity International. "Revisiting the Fragile Five at Five."

  3. Barron's. "Morgan Stanley’s New Fragile Five."

  4. CNBC. "These Are Now the 5 Most Fragile Countries Exposed to Higher Interest Rates, According to S&P."

  5. World Economic Forum. "These are the World’s Most Fragile States in 2019."

  6. The Organisation For Economic Co-operation And Development (OECD). "Business Insights On Emerging Markets 2021," Pages 11-14.

  7. The Brazilian Journal of Political Economy. "The Global Crisis and the Implications for Developing Countries and the BRICs: Is the "B" Really Justified?"

  8. BYJU's. "Topic of the Day—Fragile Five."

  9. Indonesia Investments. "IMF: What about the Fragile Five Emerging Economies in 2014?"

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