EM capital inflows to rise to a decade-high: Fitch

LONDON

Higher growth in emerging markets (EM), including Türkiye, relative to developed markets and the prospect of U.S. Federal Reserve rate cuts later this year are expected to push emerging-market net capital flows to a decade high in 2024, Fitch Ratings has said in its latest Economics Dashboard.

Fitch has analyzed trends in net private capital flows to the largest emerging markets, focusing on the nine emerging-market countries (EM9) covered in Fitch’s “Global Economic Outlook” (GEO).

In 2007, EM9 net flows reached $408 billion (5 percent of GDP) but then collapsed during the global financial crisis, the rating company noted.

“In the subsequent recovery, net flows rose to a still-strong $200 billion-300 billion [2 -3 percent of GDP] in 2010-2013 but have been subdued since 2015, averaging around $100 billion [1 percent of GDP].”

Fitch predicts that emerging-market capital flows will recover strongly in 2024 to 2.2 percent of GDP.

Its aggregate measure of net capital flows to emerging markets - which excludes China - consists of four categories of flows: Foreign Direct Investment (FDI), portfolio equity, portfolio debt and bank flows.

Türkiye recorded $642 million worth of FDI inflow through equity capital flow, $256 million through the sale of real estate to foreign nationals, and $410 million through debt instruments in November 2023, the International Investors’ Association (YASED) said in a report last month, based on the figures from the balance of payments data.

The FDI inflows for the first eleven months of 2023 amounted to $9.2 billion, marking a 27 percent decrease compared to the same period last year.