The Institute of International Finance announced a record outflow of investment from developing countries

The publication writes that the net outflow of investments from developing countries has reached its peak since 2005. In addition, this is the longest series of withdrawals from these markets in the entire history of the observations of the Institute’s specialists.

Entrepreneurs around the world have withdrawn more than $38 billion from emerging markets, which were predicted last year to recover quickly from the pandemic.

Investing in emerging market stocks and domestic bonds was just $10.5 billion in June, according to the Institute.

FT commentators attribute this global cross-border outflow of international investment to recession fears and rising interest rates.

At the same time, investors themselves seeking to secure their finances may cause the economic situation in developing countries to deteriorate. After all, capital outflows may exacerbate the growing crisis in Sri Lanka, Bangladesh, Pakistan and other states.

Commodity exporting countries are at greater risk. Experts cite two points as an indicator of this risk:

1. withdrawal of investment funds from foreign-currency bond funds of developing countries ($30 billion, according to JPMorgan)
2. and high yields on such foreign currency bonds (large spreads are believed to indicate default risk, which Sri Lanka has already announced).

Another problem is the current recession in China, exacerbated by another wave of covid lockdowns. At the same time, as the newspaper points out, the economy of this country directly affects the possibility of developing other mercantile states that depend on the export market.

Based on the FT data, we can say that under a powerful capital outflow threatens all countries with rising record inflation rates and with a strategic rate on the export of raw materials.