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Country Risk Weekly Bulletin 535

May 10, 2018
Country Risk Weekly Bulletin 535
Non-Resident Capital Inflows to Emerging Markets (US$bn)

Source: Institute of International Finance

  • Net private capital inflows to emerging markets at $1.21 trillion in 2018
    The Institute of International Finance projected non-resident capital inflows to emerging markets (EMs) at $1.21 trillion in 2018, which would constitute an increase of 0.6% from an estimated $1.2 trillion in 2017. It expected non-resident capital inflows to be equivalent to 3.7% of EM's GDP this year compared to 4.2% of their GDP in 2017. It attributed the anticipated growth in capital inflows to an increase in foreign direct investments, stronger cross-border banking flows, and supportive global financial conditions. It said that downside risks are mainly related to rising global trade tensions, an increase in protectionist measures that would impact EM exports and growth, a rise in external financing needs as a result of a stronger US dollar, as well as high and rising EM debt levels. The IIF revised upward its forecast for foreign direct investment in EMs to $523bn in 2018 from $480bn previously, supported by improved global economic activity and a modest recovery in commodity prices. It added that foreign direct investment in EMs would post an increase of 3.4% from $506bn in 2017. It projected portfolio inflows to drop from $401bn in 2017 to $351bn in 2018, mainly due to rising U.S. bond yields and a stronger US dollar. It anticipated other investment inflows, mainly banking-related flows, to grow from $297bn in 2017 to $338bn in 2018, their highest level since 2013.
    Source: Institute of International Finance
     

  • Remittance inflows to developing economies to rise by 4% to $485bn in 2018
    The World Bank projected remittance inflows to developing economies at $485bn in 2018, which would constitute an increase of 4.1% from an estimated $466bn in 2017, following a rise of 8.6% in 2017 and a decline of 2.5% in 2016. It attributed the increase in remittance inflows to developing economies to improved global economic activity and financing conditions. Further, it noted that inflows to developing economies would account for 75.5% of global remittance flows in 2018 compared to 76% in 2017. It forecast inflows to the East Asia & Pacific region to reach $135bn and to account for 27.8% of remittance flows to developing economies in 2018, followed by South Asia with $120bn (24.7%), Latin America & the Caribbean with $83bn (17.1%), the Middle East & North Africa (MENA) region with $56bn (11.5%), Europe & Central Asia with $51bn (10.5%) and Sub-Saharan Africa (SSA) with $41bn (8.5%). Also, it projected remittance inflows to SSA to grow by 7% in 2018, followed by Europe & Central Asia (+6%), the MENA region (+4.4%), Latin America & the Caribbean (+4.3%), East Asia & Pacific (+3.8%) and South Asia (+2.5%). The World Bank considered that downside risks to the remittances' outlook consist of sustained de-risking by correspondent banks, heightened policy uncertainties, rising geopolitical tensions, increased restrictions on trade, as well as restrictive migration policies.
    Source: World Bank
     

  • Merger & acquisition deals in the MENA region up 96% to $26bn in first quarter of 2018
    Figures issued by Bureau Van Dijk and Zephyr show that there were 154 merger & acquisition (M&A) deals targeting companies in the Middle East & North Africa (MENA) region for a total value of $25.7bn in the first quarter of 2018. In comparison, there were 180 M&A deals worth a total of $13.1bn in the first quarter of 2017. The figures reflect an increase of 95.7% in the value of deals and a decline of 14.4% in their volume year-on-year in the first quarter of the year. The value of M&A transactions in the UAE reached $19.8bn in the first quarter of 2018, which constitutes 77.2% of the region's aggregate deal value in the covered period. Saudi Arabia followed with M&A deals of $1.8bn (7.2%), then Egypt with $1.2bn (4.8%), Morocco with $1.1bn (4.5%), Oman with $605m (2.4%), Libya with $450m (1.8%), Qatar with $371m (1.4%), and Lebanon with $206m (0.8%), while the remaining $328m worth of deals, or 1.3% of the total, targeted Bahrain, Jordan, Iran and Tunisia. In volume terms, the UAE had 45 M&A deals in the first quarter of the year, followed by Jordan and Egypt with 26 transactions each, Saudi Arabia and Oman with 16 transactions each, Morocco with 11 deals and Lebanon with four deals, while the remaining deals targeted seven other MENA countries. In addition, the value of M&A deals targeting companies in the banking sector reached $18.6bn in the first quarter of 2018, followed by the primary sector with $2.3bn, the insurance sector with $1.2bn, the education and healthcare sectors with $611m, the construction sector with $608m, and the food, beverages & tobacco sector with $541m. 
    Source: Zephyr, Bureau Van Dijk, Byblos Research
     

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