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Sunday, 5 June 2016

EM economies set to slow as cross-border portfolio flows to come to a halt in May

More bad news for emerging markets: EM economies could be set to slow “inextricably” (not a word we’d have used; maybe they meant “inexorably”?), according to analysis by Capital Economics quoted by the Financial Times (paywall). “During the next decade or so, reduced scope for catch-up growth in some EMs, and continued underperformance in others, will probably mean that aggregate GDP growth in EMs will be lower than in the past 15 years,” says Nikita Shah, global economist at CE.

Meanwhile, net inflows of portfolio investment into emerging markets in March and April appear to have come to a halt in May “as the prospect of rising US interest rates once more overshadows the EM investment universe,” according to the FT (paywall). The Institute of International Finance said Friday the combined flows to EM debt and equities were just USD 1.2 bn in May compared to  USD 17.3 bn in April and USD 26.4 bn in March.

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