Protectionism, Monetary Tightening May Hurt Emerging Markets - IMF

A risk of protectionism in advanced economies and tighter financial conditions as US monetary policy normalizes make for a more challenging environment for emerging market and developing economies going forward, according to the International Monetary Fund (IMF).

WASHINGTON (Sputnik) — Emerging markets are heading toward more challenges as developed economies may turn to protectionism and the United States continues to tighten its monetary policy, the International Monetary Fund (IMF) said in a report released on Monday.

"Together with a risk of protectionism in advanced economies and tighter financial conditions as US monetary policy normalizes, these changes make for a more challenging environment for emerging market and developing economies going forward," the World Economic Outlook report said.

The fund said declining potential growth in advanced economies, slowdown and rebalancing in China, along with lower commodity prices are also contributing to the problem.

In March, US Secretary of the Treasury Steven Mnuchin said the United States was not going to turn toward protectionism if Washington can successfully renegotiate trade deals.

Also in March, the US Federal Reserve’s policy-setting Federal Open Market Committee (FOMC) raised the US benchmark interest rate by 25 basis points to a range of 0.75 percent to 1 percent.

The FOMC projections have also revealed the median view of the appropriate level of interest rate by the end of 2017 to be 1.375 percent.