Worsening prospects for developing countries
have coincided with a sharp slowdown in global
trade, a rise in financial market volatility, and a
substantial decrease in capital inflows (Figure 1.2).
In anticipation of tighter U.S. monetary policy,
currency pressures have intensified and borrowing
costs have increased, particularly for a number of
commodity exporters. Significant nominal
currency depreciations against the U.S. dollar are
straining balance sheets in countries with elevated
dollar-denominated liabilities. In an environment
of weak global trade, exports are likely to languish.
On the domestic front, a trend deceleration in
productivity growth, rising private sector leverage,
depleted fiscal buffers, and heightened policy
uncertainty are major headwinds.