This archive report was first published on 10 January 2022.
January 10, 2022, marked a significant day for the global economy as the International Monetary Fund (IMF) released a blog post highlighting the risks associated with the ongoing pandemic and the US Federal Reserve's (Fed) plans to raise interest rates.
According to the IMF, the global economic recovery from the pandemic is expected to continue this year and next, but the highly contagious Omicron strain has caused record numbers of new Covid cases, leading to a resurgence of the pandemic.
As a result, countries are reinstating health measures that hamper economic growth, and the IMF has warned that emerging economies should prepare for potential bouts of economic turbulence.
The Fed's plans to raise interest rates sooner and more aggressively than initially planned will further exacerbate the situation, as higher interest rates will increase financing costs for emerging economies with dollar-denominated debt.
These countries are already lagging behind in the global economic recovery and are less able to absorb added expenditure.
The IMF has recommended that emerging economy nations tailor their response based on their circumstances and vulnerabilities, while central banks raising interest rates should engage in clear and consistent communication to ensure price stability.
