Milligan: Loose EM policies may lead to repeat of 97-98

Emerging markets are at risk of a financial crisis to rival the one seen in 1997-98 unless they tighten up monetary policy, Standard Life Investments' head of global strategy has warned.

Andrew Milligan said while emerging economies have buoyed the global economic recovery thanks to their strong consumer base and rapid industrialisation, they could suffer a series of asset bubbles and inflationary headwinds. He said emerging economies were at risk if they maintained loose monetary policy as it could lead to an unsustainable mix of consumer inflation, property bubbles, current account imbalances and foreign exchange accumulation. “One risk to monitor is that GEM monetary policy is kept too loose,” Milligan said. He said this could cause another crisis similar to the o...