The International Monetary Fund (IMF) has recently stated that a 10 percent appreciation in the dollar, linked to global financial market forces, including Nigeria, was responsible for the 1.9 percent decrease in economic output in emerging market economies.
The UN financial agency noted that this decline persisted for two and a half years as it announced that the US dollar strengthened to a 20-year high in 2022, with major implications for the global economy.
A strong dollar, according to IMF, meant that trade and financial channels in emerging market economies like Nigeria were affected.
“Their real trade volumes decline more sharply, with imports dropping twice as much as exports. Emerging market economies also tend to suffer disproportionately across other key metrics: worsening credit availability, diminished capital inflows, tighter monetary policy on impact, and bigger stock-market declines,” IMF said.
It also noted that US dollar appreciations impacted the current accounts of these countries. It explained that current accounts captured the change in saving-investment balances of countries.
“As a share of Gross Domestic Product, current account balances (saving minus investment) increase in both emerging market economies and smaller advanced economies, because of a depressed investment rate (there is no clear systematic response for saving). However, the effect is larger and more persistent for emerging market economies,” it stated.
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