Fitch: Capital flows to emerging markets including Türkiye to reach 10-year high

Fitch Ratings forecasts that capital flows to the nine largest emerging markets, including Turkey, will reach $200 billion this year, the highest level in 10 years. In its analysis titled “Net Capital Flows to Emerging Markets to Recover Strongly,” Fitch Ratings examined trends in net private capital flows to the largest emerging markets by focusing on nine emerging countries included in the “Global Economic Outlook” report. These countries include Turkey, Mexico, South Korea, South Africa, Brazil, Poland, India, Indonesia and Russia. In the analysis, net capital flows to emerging markets excluding China consist of four categories: foreign direct investment, portfolio equity, portfolio debt and bank flows. Accordingly, due to higher growth in emerging markets relative to advanced economies and expectations that the US Federal Reserve will cut interest rates this year, net capital flows to emerging markets will reach $200 billion this year, the highest level since 2013. Thus, capital flows to emerging markets will recover strongly this year, reaching 2.2 percent of GDP in these countries. While the majority of capital flows to emerging markets are foreign direct investments, India, Brazil, Mexico and Indonesia stand out as investment destinations that have recorded sustained net capital inflows over time. Capital flows to these nine emerging markets peaked at $408 billion in 2007, equivalent to around 5 percent of the countries’ gross domestic product (GDP). Capital flows to these countries have weakened significantly since 2015. Capital flows to the nine emerging markets have been volatile for the past two years, turning negative in 2022 and beginning to recover again as of the third quarter of 2023, driven by increased outflows from Russia.