The International Monetary Fund warned the Group of 20 Wednesday that emerging economies were slowing more than expected and under pressure from U.S. plans to slow its stimulus.
In a report prepared for the two-day summit of the G20 major economies that opens Thursday in St. Petersburg, Russia, the IMF said that recent indicators pointed to stronger growth in several advanced countries, but key emerging economies have slowed.
Since its July report on global developments and risks, the IMF said, growth projections for emerging economies are being revised downward "with risks still to the downside."
"The impulse to global growth is expected to come mainly from the United States in the near term," the report said.
"Overall, concerns about a prolonged period of sluggish global growth (a plausible downside scenario) remain elevated."
Brazil, China and India were mainly responsible for the loss of some 2.5 percentage points in emerging economy growth since 2010 levels.
Lower commodity prices also have hit the outlook for many commodity exporters.
Tightening global financial conditions, spurred by market conviction that the US Federal Reserve is close to reeling back its stimulus program, have added to the pressure on emerging economies.
Since May, when the Fed began signaling it would taper its $85 billion a month bond-buying program if the US economy continued to improve broadly, investors have pulled out of emerging economies seeking higher returns in the US and elsewhere.
The outflow of capital has driven emerging-market currencies sharply lower, from Brazil to India and Turkey.
"Emerging economies were hardest hit following Fed 'tapering' remarks," the IMF said, adding that external financing pressures remained heightened in Brazil, India, Indonesia, Turkey and South Africa.
Emerging economies' policy responses should be tailored to the specific country and could include "some intervention to smooth current market volatility" in countries with adequate reserves.
"Fed tapering of asset purchases may trigger exchange rate and financial market overshooting in emerging market economies, while they are trying to cope with rising domestic vulnerabilities and slower growth," the report said.
The IMF predicted global growth to strengthen moderately in 2014 from 2013.
But it warned, "downside risks remain and some have become more prominent."
"More policy ambition and cooperation are needed to achieve the G20's shared objectives of strong, sustainable, and balanced growth," the 188-nation IMF said.
A heavy reliance on unconventional monetary policy in the advanced economies, for example, has had "overall positive effects" and has bought time for economies after the 2008 global financial crisis.
But the IMF told G20 leaders that reforms were clearly needed.
"Widespread financial, fiscal, and structural impediments need to be addressed to bolster growth and financial stability."
[Image via Agence France-Presse]