Many of the countries followed in Emergingmktstories are commodity dependent. The policy responses recommended here are wise but extremely difficult to implement politically and socially. The long term solution of course is to reduce dependence on raw materials and move to higher value-added sectors.
A number of emerging market economies have been on a rollercoaster since the U.S. Federal Reserve announced last May the eventual tapering of its asset purchase program. This is another reminder of how susceptible these economies remain to economic conditions outside their borders.
Much of the market movements to date have been short term in nature. But emerging markets know the end-game – interest rates in advanced economies will eventually go up, reducing the cheap external financing they have benefited from until now. And this is not the only external factor weighing on the growth prospects of emerging markets.
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