Even though most of the West is recovering, there are still plenty of bumps in the road ahead and there’s no reason to expect developed markets to rise and fall together. But there are a few key indicators that determine how well countries will be able to respond to negative shocks, says Natixis analyst Patrick Artus. Using those, he’s identified the most fragile OECD countries to be wary of.

OECD economic policies

“We believe that fragility increases with the private-sector debt ratio, banks’ debt leverage, the inability to use counter cyclical economic policies, the external deficit and external debt,” says Artus. Taken together, these factors constrain governments’ ability to act and magnify the impact of an unexpected downturn.

One potential shock that could be coming down the pipeline is rising risk aversion, which increases risk premiums across the board. Risk perception has been rising for most of 2013, and the recent outflows from emerging markets could be one indication that investors are tired of taking on so much risk.

OECD risk perception 0913

Negative shocks

Another negative shock would be “A decline in global growth and global trade given the uncertainty overhanging the European economy and the situation of large emerging countries,” says Artus. Real global GDP has actually been falling (though it’s grown recently if Russia and OPEC are excluded), which could pose problems if it doesn’t turn around soon. Financial institutions will also be impacted by rising long-term interest rates, which will only continue going up once tapering gets started.

OECD GDP exports value terms 0913

OECD interest 10 year bonds 0913

Geopolitical tension

Finally, geopolitical tensions (notably those surrounding Syria) could lead to higher oil prices, reduced global trade, or other unintended consequences. Artus looked at large OECD nations and compared their ability to cope with these spikes by noting which fragility factors applied to them. He didn’t try to compare the severity of these factors, simply whether or not they are significant. So Greece, which has crushing debt and almost no ability to use counter-cyclical fiscal policy didn’t make the list, even though most people would expect it to fare poorly if the recovery unwind.

8 most vulnerable economies

“The most fragile countries according to these criteria are the United Kingdom, Spain, Belgium, Portugal, Ireland and Japan,” says Artus.