The International Monetary Fund has declared that a 10% increase in the dollar, connected to dynamics in the global financial markets, reduced economic output in emerging market nations by 1.9%, including Nigeria.
It was noted that this drop lasted for two and a half years. According to the IMF, the US dollar will grow to a 20-year high in 2022, which would have a significant impact on the world economy.
The IMF claimed that a high dollar has an impact on trade and financial channels in developing market countries like Nigeria.
It stated, “Their real trade volumes fall more precipitously, with imports falling by twice the rate of exports.
Additionally, “other important variables that are particularly problematic for emerging market economies include worsening credit availability, diminished capital inflows, tighter monetary policy on impact, and bigger stock-market declines.”
The Washington-based lender claimed that the strengthening of the US currency had an impact on these countries’ current accounts. It clarified that current accounts tracked changes in a country’s savings and investment balances.
The report read, “There is no obvious systematic response to saving. Current account balances (savings minus investment) increase as a share of GDP in both developing countries and smaller advanced economies.
“For emerging market economies, the impact is greater and more long-lasting,” it stated.
