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AfrAsia Bank Limited and its Group Entities
Annual Report 2015
page 128
MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)
…undermined by relatively slower growth in emerging markets…
Forecasts show that emerging market and developing economies would be recording in 2015 slower growth for the fifth year in a row.
This is even more prominent in the case of the larger emerging market economies and oil-exporting countries.
In emerging market economies, the continued growth slowdown reflects several factors, including lower commodity prices and tighter
global financial conditions, structural bottlenecks, rebalancing in China (as it seeks to achieve consumption-driven sustainable growth), and
economic distress related to geopolitical factors. Even if a rebound in activity in a number of distressed economies is expected to result in
a pickup in growth in 2016, most analysts reckon that growth prospects will differ markedly across countries, several of which face country-
specific shocks.
…and rapidly declining capital inflows to emerging market economies
Emerging market and developing economies as a group has started disposing of foreign exchange reserves in 2014 (to the tune of USD
100bn in foreign exchange reserves during both 2014Q4 and 2015Q1) amidst a sudden reduction in gross capital inflows, i.e., declining
purchases of domestic assets by non-residents. This is particularly significant for China, Russia, Saudi Arabia and Latin America, according
to the IMF. In parallel, given the relatively stable aggregate current account balances for this group of countries, the decline in inflows has
been offset by a corresponding decline in gross capital outflows.
Capital flows in emerging and developing economies
Source: “World Economic Outlook: Adjusting to lower commodity prices,” IMF, October 2015
15
12
9
6
3
0
-3
-6
2007
2008
2009
2010
2011
2012
2013
2014
2015
Emerging Europe
Emerging Asia excluding China
Latin America
China
Saudi Arabia
Total
CAPITAL INFLOWS (PERCENT OF GDP)