New Articles

World Bank Group Releases Data to Drive Investment in Emerging Markets

world bank group global trade emerging markets

World Bank Group Releases Data to Drive Investment in Emerging Markets

The World Bank Group has taken a significant step towards boosting investment in emerging markets by publishing valuable proprietary statistics aimed at providing transparency and inspiring investor confidence. This move, which makes previously inaccessible data publicly available, is part of a broader effort to attract more private sector capital to developing economies.

In a groundbreaking development, the International Bank for Reconstruction and Development (IBRD) is sharing sovereign default and recovery rate statistics dating back to 1985, offering insights into the credit risk profile of private and public sector investments in emerging markets. Simultaneously, the International Finance Corporation (IFC) is releasing private sector default statistics, providing a granular breakdown by internal credit rating. These reports are intended to empower credit rating agencies and private investors with the information needed to make informed investment decisions in emerging markets.

World Bank Group President Ajay Banga emphasized the importance of transparency and investor confidence in driving private sector investment in developing economies. By making proprietary information a global public good, the World Bank Group aims to facilitate the flow of capital into these markets, thereby promoting economic impact and job creation.

The World Bank Group’s data release complements existing statistics provided by the Global Emerging Markets Risk Database Consortium (GEMs), further enhancing transparency and risk assessment capabilities for investors. The consortium, consisting of multilateral development banks and finance institutions, publishes sovereign and private sector default statistics annually, contributing to a comprehensive understanding of emerging market dynamics.

Key takeaways from the World Bank Group’s statistics highlight the resilience and untapped potential of private sector investments in emerging markets. Despite perceptions of higher risk, the IFC’s private sector portfolio exhibited a low default rate of 4.1% from 1986 to 2023, with even investments categorized as “weak” demonstrating favorable performance. Additionally, sovereign defaults are rare, averaging just 0.7% annually, underscoring the World Bank’s preferred creditor status and effective management of sovereign credit risk.

The comprehensive data provided by the World Bank Group facilitates more nuanced risk assessments and better-informed investment decisions, ultimately leading to improved access to capital for emerging markets. By increasing transparency on historical performance and bolstering investor confidence, this initiative aims to catalyze private investment in developing economies, driving sustainable growth and development.

‘Emerging Markets’ Attracting US Exporters: Report

New York, NY – US businesses are increasingly looking to emerging markets for export growth in both the short and long term, according to the latest HSBC Global Connections Trade Forecast.

Even though US exports are expected to grow by about six percent per year through 2030 and advanced economies will continue to play a dominant role in US trade, the forecast predicts that China and India “present the best trade prospects, with US export growth to average nine percent a year to each country through 2030.”

Additionally, the report said, thirty percent of US business leaders participating in the HSBC Trade Confidence Index Survey (TCI) identified Asia, especially China and India, as the most promising region for business expansion in the next six months, while a quarter favored Latin America, especially Mexico and Brazil.

US Export and Import Forecast

US TCI dipped to 110 from 115 and lower than the global average of 116,” though still well above the neutral benchmark of 100 indicating that the outlook for trade continues to improve although at a slower pace than previously,” the report said.

Sixty percent of US business leaders in the TCI survey expect trade flows to increase, down from 66 percent six months earlier.

Industrial machinery and transport equipment are the key industries driving US export expansion now and into the future, while the top export destinations for the US over the medium term will continue to be Canada, Mexico and China.

However, the report said, Korea and Brazil will displace the slower growing economies of Germany and Japan over the long term to complete the top five US export markets.

Respondents said the biggest areas of opportunity in Asia in the short term are in construction and manufacturing, while in Latin America they are in wholesale and retail.

On the import side, Transport equipment and information, communications and technology equipment will continue to drive US imports.

China, India and Vietnam will be the fastest growing suppliers of US imports. Imports from China will grow by an average of seven percent through 2020, accounting for about one-fifth of all US imports.

The index is an international survey of 5,500 small and middle market businesses engaged in cross-border trade including around 250 in the US.

“Despite near term challenges, there are clearly significant export opportunities in emerging markets and the good news is US businesses are well positioned to take advantage of them, especially as global trade picks up.” said Steve Bottomley, HSBC group general manager, senior executive vice president and head of commercial banking for HSBC in North America.

“A highly educated workforce, well-developed production processes, and innovative technology will help US businesses plug into increased trade flows, while the rise of the emerging market consumer is helping to lift demand,” he said.

US Pharmaceutical and Energy Growth

One US sector that is set to benefit from the increased demand from emerging markets consumers is pharmaceuticals. US pharmaceutical exports are expected to grow by nearly eight percent a year through 2030, outpacing overall export growth for the same period.

This will help the US overtake Germany as the leading exporter of pharmaceutical products by 2030 amongst the 25 countries included in the report.

“Rising global demand for better healthcare, especially in emerging markets, is expected to trigger increased spending on healthcare over the next several years,” said Derrick Ragland, executive vice president and head of US middle market corporate banking, HSBC Bank USA.

“As a global innovator in pharmaceuticals and biologicals, US companies should find it easier to expand into or enter new markets.”

Still, the report notes that healthcare reform and an aging population will drive the US trade deficit for pharmaceuticals goods higher through 2030.

Additionally, to remain competitive, US pharmaceutical companies will need to invest in research and design to promote innovation especially as access to increased supplies of generic products from abroad rises and US patents on many major brand products expire.

Emerging markets, the forecast said, will also be a key focus for US energy trade.

“Rapidly rising production of unconventional oil and gas products domestically will help lift US energy exports by about five percent per year through 2030, while petroleum imports will fall from 12 percent in the near term to seven percent in the long term,” it said.

“Emerging markets that don’t have refining capabilities or don’t dispose of energy reserves could represent a major opportunity for US energy exporters,” said Ragland.

Overall Global Outlook

Globally, trade is expected to grow annually by eight percent beginning in 2016 from 2.5 percent in 2013.

Over the longer term, the forecast shows that global merchandise trade will more than triple by 2030 from 2013 levels, as businesses capitalize on the rise of the emerging market consumer and developing markets stabilize their productivity levels for the future.

The HSBC Trade Forecast, modeled by Oxford Economics, forecasts bilateral trade for total exports/imports of goods, based on HSBC’s own analysis and forecasts of the world economy to generate a full bilateral set of trade flows for total imports and exports of goods, and balances between 180 pairs of countries.

The HSBC Trade Confidence Index covers a total of 23 markets and is the largest trade confidence survey globally. The current survey comprises six-month views of 5550 exporters, importers and traders from small and mid-market enterprises on: trade volumes, risk to suppliers, need and access to trade finance, impact of exchange rates and regulation.

09/16/2014