Resilience in emerging markets: what makes it, what could shake it?

Key takeaways

• Emerging market economies broke with the past by showing resilience in the face of rapid monetary tightening in advanced economies. Structural factors were at play, with better monetary policy and prudential frameworks being key.
• Conjunctural factors also played a role. The commonality of the Covid-19 shock ameliorated policy trade-offs, while the strong showing in advanced economies supported financial market sentiment globally.
• Nevertheless, as with the rest of the world economy, emerging markets are not out of the woods. More persistent inflation, in particular in advanced economies, could keep global financial conditions tighter for longer and test emerging market resilience going forward.