Emerging Markets Seeing Most Capital Outflow In 27 Yrs
Net capital flows to emerging markets in Y 2015 will be negative for the 1st time since 1988, the Institute of International Finance (IIF) said in a report Thursday.
The institution estimated that among the 30 emerging economies it has surveyed, there will be US$540-B net capital outflows this year, compared to net capital inflows of US$32-B in Y 2014.
The net capital outflows would continue at a moderate pace of US$306-B in Y 2016, on the expectation of the subdued growth prospects for the emerging market economies, as well as the US Federal Reserve’s policy tightening, the report said.
The institution expected the growth rate of emerging markets to reach only 3.5% this year, the lowest since the Y 2008 global financial crisis, and will moderately rise to 4.2% in Y 2016.
The IIF also warned of risks of high-level non-financial corporate debt to GDP (gross domestic product) ratio in emerging markets.
“As monetary policy continues to diverge and the Fed begins liftoff, countries with large amounts of corporate debt, especially in USD, will face difficulties, with rising prospects for corporate distress, weakening capital investment and growth,” said Hung Tran, executive managing director at the IIF.
By Hou Quiang
Paul Ebeling, Editor
HeffX-LTN
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