Improved trade positions set to gradually unwind

The broad-based improvement in EM goods trade balances over the past year is likely to unwind over the coming quarters as consumption patterns gradually normalise and oil prices recover further. But at the same time, a big build-up of external imbalances is much less likely than it was a decade ago in the aftermath of the Global Financial Crisis. This should limit the extent to which EMs become vulnerable to a tightening of external financing conditions.