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In 2017we had a Goldilocks global economy. Inflation started picking up in the advanced economies, and in emerging markets it was in line with targets. Growth was stronger, and most economies were accelerating — the world economy felt just right. As you know, at the end of the Goldilocks story a family of bears comes home. Our tale has taken the same direction. The synchronisation of global growth has broken down in 2018,with the US surging ahead while other countries slow down.

Stronger US growth and higher rates have appreciated the dollar. This combination of factors challenges emerging markets. It has interrupted capital flows and prompted currency depreciation. Countries with substantial stocks of foreign currency debt have seen their balance sheets deteriorate. Inflation pressures have generally intensified. Unlike Goldilocks, however, most emerging markets weren’t caught napping when the bears returned. Policy frameworks can handle such challenges. In particular, most e...

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