The institute expected Latin America, in general, to be one of the preferred destinations for foreign investment in emerging markets, despite negative signs from Argentina, and expressed doubts about the withdrawal funds from China, Turkey and other countries.
The institute expects the US economy to grow by 1% in 2023, which, combined with forecasts that inflation will reach a moderate level of 3.1% per year by the end of the year, provide a favorable environment for overseas investment in developing countries.
According to the Institute’s estimates, the flow of foreign capital to emerging markets is expected to increase and the flow of capital abroad to decline this year, which will lead to a decline in net capital flows in from emerging markets overseas to around $173 billion, up from $522 billion in 2022.
Excluding China, net capital inflows are estimated at around $80 billion this year, after announcing outflows of $221 billion in 2022.
Usually, rising interest rates and tighter monetary policy in developed markets, of which the United States is the most important, does not bode well for emerging markets, as investors prefer attractive yields. and secured in times of uncertainty, causing them to withdraw their money. less developed countries.
Investors began venturing into new ventures after China, their recent favorite, was hit by a marked slowdown in economic growth as well as perceived political risks that made Russia uninvestable after invading Ukraine early last year.
The Institute of International Finance said net foreign direct investment in China for all of 2023 is expected to be the lowest in 18 years.
As for Africa, the institute expects Egypt to offer steep discounts given its efforts to sell off state-owned assets as part of the structural adjustment it needs.
The institute said the key to this amendment is “the adoption of a flexible exchange rate regime, which (the central bank) has encouraged a great deal, but with caution.”
In Saudi Arabia, foreign capital inflows are expected to quadruple year-on-year to $44 billion this year with an increase in foreign currency bond issuance, as well as an increase in equities.
The institute added that “preliminary data for the first five months of this year shows that foreign currency bond issuances have already exceeded the volume of similar issuances for the whole of last year.”
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