The intention of the US Federal Reserve to accelerate the interest rate hike due to higher inflation and a widening US budget deficit has triggered capital outflows from emerging markets to the United States. As a result, emerging market currency exchange rates have weakened dramatically and stock and bond markets have been hard hit.

Strong macro-stabilisation efforts characterised Sri Lanka’s economic policy in 2017. After two years of budgetary turmoil, fiscal consolidation efforts under an ongoing IMF program are delivering higher revenues for the cash-strapped Treasury. A stronger fiscal footing is allowing Sri Lanka’s central bank to act pragmatically in its fight against inflation.

The Japanese economy is in very good shape. Japan is experiencing its second-longest period of continuous economic upswing since the end of World War II and many expect this to continue to become the longest in the country’s post-war history. As Goldilocks would say, everything seems ‘just right’. But for Japan just as for Goldilocks, the three bears are on their way back home.

It has been over three months since the November 2016 surprise demonetisation of 86 per cent of India’s currency in circulation. The short-run costs of the measure are becoming clearer. India’s industrial production sector, for instance, has been hit hard with negative growth in December 2016. Overall, the aggregate growth cost of the demonetisation measure is expected to be up to 1 per cent of GDP.

Despite major domestic and external challenges, Indonesia is expected to grow at around 5 per cent again this year — much like last year — and only slightly below the official estimate of 5.3 per cent but much lower than the 7 per cent the new government had targeted. Compared to continued downward global growth, including that of China and its ASEAN neighbours, Indonesia’s stable growth looks quite respectable.

Economics is imprecise, and so are predictions made by economists. In the early 2000s, renowned economists argued that the so-called ‘US twin deficits’ were unsustainable, and predicted that a crisis accompanying a free fall of the US dollar was imminent. In the end, a major crisis did originate from the United States in 2008. But it was not a balance of payments or fiscal crisis, and in its aftermath, we saw a sharp appreciation of the dollar.

There is never a dull moment in China’s property market. In August, surging demand led to scores of people lining up to file divorce applications in Shanghai because separated couples can buy more houses. Then in the first week of October, Chinese cities rolled out new measures to cool the home buying frenzy that has seen prices skyrocket, marking a new round of tightening since policies were eased two years ago.

During this year’s G7 summit, Japan announced its vision of creating a LNG market to meet increasing energy demand. Natural resource markets are a foundation for trade and economic development. What is less well known is the close link between the natural resource markets and the currency markets.

China is unusual in that it is a developing country that has emerged as a major investor. China itself is an important destination for foreign direct investment, and opening to the outside world has been an important part of its reform program since 1978. But China’s policy is to steer FDI to particular sectors.

In the past three and a half decades, China has grown rapidly. Between 1978 and 2015, the real gross domestic product (GDP) of the country increased from US$0.21 trillion to US$10.86 trillion, an annual growth rate of 11.3%. As a consequence, China has overtaken Japan to become the second largest economy in the world since 2010. It is widely believed that the rapid economic growth in China is heavily related to its trade with the rest of the world. On one hand, China increased the aggregate demand for domestic production through exporting labour intensive products so as to facilitate the urbanisation and industrialisation process; on the other hand, China imported a large amount of primary commodities such as petroleum, iron ores and agricultural products, and services to feed the need of domestically expanding production.