[dropcap radius=”1″ style=”” color=”#FFF” bg_color=”#ccc” border_color=”#CCC”] W [/dropcap]hile the global economy has grown at a moderate pace, it is subject to several key downside risks. First, many EMEs are particularly exposed to the eventual normalization of the policy rate in the US on account of strong financial linkages with the advanced countries. This may hamper growth especially in EMEs with weak economic fundamentals. Second, inflation levels are stubbornly low relative to target levels in many advanced economies. The risk of protracted low inflation or deflation 
compounds the prospect of ongoing recovery in many advanced economies, especially in Europe. Third, the scale of geopolitical tensions has risen in recent times, which may stress many markets including the oil market. Fourth, the record high global equity prices accompanied by very low volatility and modest economic growth may encourage excessive risk taking and raise concerns about potential formation of capital market bubbles.
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