The Institute of International Finance reduced its forecast for non-resident capital inflows to emerging markets (EMs) to $1.14 trillion in 2018 from a May projection of $1.21 trillion, and compared to inflows of $1.26 trillion in 2017. It expected non-resident capital inflows to be equivalent to 3.7% of EM's GDP this year, down from 4.4% of their GDP in 2017. It attributed the anticipated decline in capital flows to lower portfolio inflows, which it projects at $310bn in 2018, down from a May forecast of $351bn. Specifically, it lowered its expectations for debt inflows to $246bn in 2018 from $255bn previously, and for equity flows to $64bn down from an earlier forecast of $95bn. It projected foreign direct investment at $504bn in 2018, down from a May forecast of $523bn; while it expected other investments in EMs, mainly banking related flows, at $325bn in 2018, down from a previous forecast of $338bn. It said that downside risks include the intensification of trade tensions between the U.S. and China, faster-than-expected increase in U.S. policy rates, a stronger US dollar, policy uncertainty in China, and delayed or inadequate policy response in EM countries.

Further, the IIF forecast non-resident capital inflows to Emerging Asia to grow from $725bn in 2017 to $764bn in 2018, mainly due to a rise of $143bn in inflows to China. In contrast, it projected inflows to Latin America to decline from $235bn in 2017 to $199bn this year, those to the Middle East & Africa region to regress from $166bn last year to $149bn in 2018, and inflows to Emerging Europe to fall from $134bn in 2017 to $26bn this year. 
Source: Institute of International Finance