IMF sees emerging economies vulnerable to US tapering

Recommends policy makers to be ready to handle rise in financial instability

Advanced economies led by the United States will increasingly drive global growth, with emerging countries at risk of slowing due to tighter US monetary policy, the International Monetary Fund said in a note prepared for the Group of 20 meeting in St. Petersburg.

In its surveillance note, obtained by Reuters, the IMF urged strengthened global action to revitalise growth and better manage risks, warning some downside risks have become more prominent.

Emerging economies are seen particularly vulnerable to a tightening of US monetary policy, and the IMF recommended policy makers be ready to handle a rise in financial instability.

"Policy makers should allow exchange rates to respond to changing fundamentals but may need to guard against risks of disorderly adjustment, including through intervention to smooth excessive volatility," the IMF said.