The year began with economic policy makers in the advanced economies wrapped with uncertainty about whether their politicians would be able to deliver the required votes on economic reforms essential for the resolution of the European sovereign debt crisis and the aversion of the US fiscal cliff. Markets were jittery and credit spreads were high.
In the meantime, emerging market (EM) economies policy makers on the other side of the globe while doing relatively better, had become increasingly concerned with “spillover” to their economies, given the relative importance of Europe and the US as trading partners to these economies.