It is reported that US GDP in the third quarter rose by an annualized rate of 5%, the fastestrate of growth recorded since 2011. The rebound is above expectations - a 5% increase ishistorically unusual, especially for an economy as big as the US.
The U.S. has been maintaining inflation below 2%, and low prices have contributed to theeconomic rebound. Low inflation, combined with low international oil prices, has given aboost to US consumer confidence and to domestic consumption. A strong US dollar hasattracted foreign capital to the US.
The rebound in the US economy is definitely good news domestically, but it is mixed newsfor emerging economies. As the US is a major importer, its recovery will increase itsimports from emerging economies. Emerging economies can take the opportunity topromote their economic development.
But there is also a challenge caused by the rebound in US economy and a strong US dollar.As the US economy grows stronger, the Federal Reserve is likely to raise its interest rates,which will result in depressing the currencies of emerging economies. This will cause afurther outflow of foreign capital from emerging economies. Russia's large economy isalready suffering from a weak ruble. China is suffering similar pain. This outflow of foreigncapital will pose a challenge to emerging economies.
To deal with this challenge, emerging economies should have sound monetary policy, andsignificant and well-managed foreign reserves. They will also need to focus on furtherdeveloping their real economy.
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