Emerging market countries are facing increasing difficulties around the world because of the spreading global economic crisis, with demand falling for their exports, investment slumping, and cross-border lending drying up.
As the crisis becomes more prolonged, a growing number of emerging economies will find room for policy manoeuvre becoming increasingly limited, and large-scale official support is likely to be needed from bilateral and multilateral sources.
Overall, risks are largest for emerging economies that rely on cross-border flows to finance current account deficits or to fund the activities of their financial or corporate sectors. Countries with pegged exchange rate regimes may have little scope for interest rate cuts to the extent that the crisis has put sustained pressure on their exchange rates.
Foreign direct investment is set to slow significantly, given the fall in private equity assets, the lack of credit available to finance acquisitions, and sharply deteriorating growth prospects in emerging markets.
This report (PDF) highlights the main policy issues facing emerging market economies, and IMF action to support its emerging market members.
0 Responses to “Emerging Markets: A macro view perspective”