IIF: Private capital flow to emerging markets to drop hugely

By Wu Ye, Qu Shaohui

BEIJING, June 12 (Xinhuanet) -- Dramatic decline in
net private capital flows to emerging markets will be seen in 2009, according
tothe Institute of International Finance (IIF).

Ina report released Thursday at the Spring
Membership Meeting,the IIF predicted that the volume of private capital
flows to emerging markets this year will likely be 141 billion U.S. dollars,
which is less than one-half of the 2008 total of 392 billion dollars and far
below the record of 888 billion dollars seen in 2007.

Regional divergences are also highlighted in the IIF
report. Most significantly, projections of flows to "Emerging Asia" and Latin
America have been revised upwards while revising down the estimates of net flows
to "Emerging Europe."

In Asia, the net private capital flows to emerging
markets is projected 88 billion dollars this year ascompared to59
billionin 2008 and record 296 billionin 2007. Aggregate net
repayment of private sector capital by "Emerging Europe," of 33 billion dollars,
is now foreseen in 2009, after net inflows of 214 billion dollars in 2008.

Nevertheless, a modest revival of flows is now
starting to become evident and the IIF projects that the 2010 volume of private
capital flows to emerging markets will reach 373 billion dollars.

The IIF said that following a period of extreme
weakness between October 2008 and March 2009, flows to emerging markets appear
to have improved somewhat over the last two months, albeit to levels far below
the early months of 2008.

William Rhodes, First Vice Chairman of the IIF's
Board of Directors, Chairman and President, Citibank and Senior Vice Chairman,
Citi, stressedthat moderate recovery in capital flows inemerging
markets partly reflects a rise in investor confidence both in response to
measures taken bygovernments in emerging markets, including China, to
stimulate their economies and to the international support that emerging markets
are now starting to receive.

In the report, IIF projected that net private capital
inflows to China, which moderated from a peak of 153 billion dollars in 2007 to
88 billion dollars in 2008, are set to stabilize at around 60 billion dollars
this year and next year.

Rhodes also noted, "The International Monetary Fund
must deploy its expanded resources with skill to assist its member countries to
achieve economic recovery. And, it is also important that every effort be made
to increase the resources available to the World Bank Group, including the
International Finance Corporation, and to the regional development banks,
including the Asian Development Bank. These institutions have major roles to
play at this time."

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