Will the Emerging Market Turmoil be Contained

- Emerging market economies (EMs), as a group, continue to exhibit solid growth. This is the case especially in Asia and among oil-exporters, supported by growth in the advanced economies, the recovery in world trade, and the resilience of non-oil commodity prices. - However, financial markets have become very nervous about the prospects for several EM, reflecting specific weaknesses in several countries – Argentina and Turkey stand out - and the prospect of higher international interest rates. - Though many lessons from past crises have been learnt, economic fundamentals in the EM vary greatly, and contagion is quite possible. - The current episode will probably remain contained and the ongoing global economic expansion is unlikely to be derailed. However, if international risks – such as an escalation in trade conflicts – materialize, this picture could change quite suddenly. - The MENA region is more sheltered than other EM from the turmoil, but it is certainly not immune, and caution is required.