| NEW YORK
NEW YORK Feb 9 Capital flows to emerging
markets will be negative in 2017 for a fourth straight year,
driven by sizeable outflows from China, the Institute of
International Finance said in a report released on Thursday.
The IIF estimates its group of 25 emerging market economies
will see a total of $490 billion of outflows this year. China is
expected to see around $1 trillion of resident outflows
including errors and omissions and $560 billion of net capital
Emerging markets excluding China should see inflows of $70
billion, nearly double the pace of 2016.
"While we project a slight uptick in capital flows in 2017,
policy risks and potential deterioration in the global
environment makes us cautious," said Hung Tran, IIF's executive
The expectation for overall negative capital flows in
emerging markets is based largely on reduced expectations for
foreign direct investment and portfolio equity investment.
FDI flows to emerging markets are expected to fall to their
lowest level since the financial crisis, IIF said.
"A disturbing development over the past year has been the
decline in foreign direct investment inflows to (emerging
markets)," said Ulrik Bie, IIF's chief economist for global
Outflows from China surged to a record $725 billion last
year and could pick up further if U.S. firms face political
pressure to repatriate profits, IIF said in a report released
earlier this month.
Nonresident capital inflows should total $680 billion this
year, $90 billion less than its projections before Donald
Trump's surprise U.S. presidential election victory, according
to the group's projections. That is up marginally from $676
billion of nonresident inflows to emerging markets in 2016.
Capital inflows had fallen to a 12-year low in 2015.
The group says the biggest risk will be the level of
protectionism imposed by developed economies and the outcomes of
elections in Europe.
"The global economic outlook remains very uncertain, with an
almost binary outcome likely to be determined by the severity of
the protectionist measures to be introduced by the new Trump
Administration and the outcome of the French presidential
election," the IIF's report said.
(Reporting by Dion Rabouin; Editing by Leslie Adler)