Credit conditions in emerging markets (EMs) continue improving, supported by sustained economic recovery in developed countries and in many cases improving domestic demand as EM economies are able to resume activities. Notably, the economic fallout from intermittent lockdowns resulting from ongoing pandemic waves hasn't been as severe as that from the initial social distancing measures in early 2020. Downside risks for EMs remain significant. The pandemic has not abated in many key EMs, and while the vaccination rate has accelerated in most key EMs, it will still take a median of eight months to reach widespread immunity. Slow vaccination leaves EMs vulnerable to new lockdowns and COVID variants, which could undermine overall credit conditions. A rapid adjustment in U.S. interest rates and persistent inflation could worsen financing conditions for EMs.