Emerging markets weather global shocks on stronger policy frameworks

Good policies and good luck cushion emerging markets in face of global volatility, says IMF

- SIPHELELE DLUDLA

EMERGING markets have shown remarkable resilience in the face of global financial volatility, thanks to a combination of “good policies” and, to a lesser extent, “good luck,” according to the International Monetary Fund's (IMF) latest World Economic Outlook (WEO) released on Monday.

The report's chapter 2, titled “Emerging Market Resilience: Good Luck or Good Policies?’, finds that many emerging economies are now better equipped to withstand global “risk-off” shocks — periods when investors retreat from riskier assets — than they were before the 2008 global financial crisis.

The IMF attributes this resilience primarily to improved monetary, fiscal, and macroprudential frameworks, which have allowed central banks to act more independently, stabilize domestic economies, and reduce reliance on foreign exchange interventions.

Andrea Presbitero, deputy division chief of the IMF Research Department's Multilateral Surveillance Division, said in a media briefing that the implementation and credibility of monetary policy have gradually improved over time.

Presbitero said central banks in emerging markets have increasingly focused on output stabilization rather than exchange rate management, reflecting better-anchored inflation expectations. “When we look at the risk of episodes before and after the global financial crisis, the data show that growth was about one percentage point higher after the GFC than before,’ Presbitero said.