“As the global economy shifts from crisis to recovery mode, the changing growth patterns—with advanced economies generally recovering and emerging markets slowing on a broad basis—carry new spillover risks, says the IMF staff. The 2014 Spillover Report, which assesses the impact of policy actions in one country on others (spillovers) and the possible consequences for the original spillover source economies themselves (spillbacks), analyzes the implications of two key trends. First, interest rates are expected to rise as some major advanced economies begin to unwind their extraordinary stimulus as recovery takes hold. With policy rates near zero and large central bank balance sheets, these central banks face complex challenges in achieving a smooth unwinding, the IMF staff report says. Yet, with recovery uneven across countries—faster in the United States and the United Kingdom than in the euro area and Japan—normalization will be “asynchronous,” that is, proceed at different times. This has possible spillovers implications. Second, emerging market economies are slowing in a synchronized and protracted manner, and average emerging market GDP growth is projected to decline from 7 percent during the pre-crisis period (2003-2008) to 5 percent over the next 5 years. This trend carries sizable spillovers to the rest of the world through trade and finance, and also has substantial influence on other emerging markets and developing economies through “neighborhood” effects. These two risks could intersect and interact with each other, the report says. “Markets may reassess growth prospects in emerging markets if there are renewed bouts of financial turbulence as advanced economies normalize monetary policy,” noted Hamid Faruqee, chair of the task force producing the report. Such a reassessment by markets could, in turn, generate further stress, he added.”