Emerging markets to see net capital outflow in 27 years

Washington, Oct 2 (IANS) Net capital flows to emerging markets in 2015 will be negative for the first time since 1988, the Institute of International Finance (IIF) said in a report.

Among the 30 emerging economies it has surveyed, there will be $540 billion net capital outflows this year, compared to net capital inflows of $32 billion in 2014, Xinhua news agency reported.

The net capital outflows would continue at a moderate pace of $306 billion in 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 percent this year, the lowest since the 2008 global financial crisis, and will moderately rise to 4.2 percent in 2016.

The IIF also warned of risks of high-level non-financial corporate debt to gross domestic product ratio in emerging markets.

“As monetary policy continues to diverge and the Fed begins lift off, countries with large amounts of corporate debt, especially in US dollar, will face difficulties, with rising prospects for corporate distress, weakening capital investment and growth,” said Hung Tran, executive managing director at the IIF.

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