Global investors still optimistic on emerging market prospects

Heightened global risk perceptions in the aftermath of the financial crisis, fueled by sovereign credit risk in the developed world and political crises in the Middle East and North Africa, have increased investor’s concerns, according to a new report by the World Bank’s Multilateral Investment Guarantee Agency (MIGA).

However, the report, “World Investment and Political Risk,” notes that investors are more optimistic over the medium term.

A survey of global investors conducted for the report finds they are “cautiously optimistic” about their investment plans in the next 12 months.

They are more confident over the next three years: nearly 75 percent of corporate respondents have plans to expand in developing countries over this period.

MIGA’s survey shows that events in the Middle East and North Africa have had a negative effect on foreign direct investment (FDI), but a significant majority of global investors said they have not changed their investment plans.

However, while investors appear willing to ride out this period of turmoil and uncertainty, they are also ready to downsize plans should political instability intensify and become prolonged.

Overall, the report notes that the recorded growth of private capital flows to developing countries, including FDI, is moderating, but is expected to regain speed in the medium term, corroborating the sentiments found in the investor survey.

“This uncertain economic landscape aside, developing countries are expected to grow more than twice as fast as high-income economies over the next few years,” notes MIGA’s Executive Vice President Izumi Kobayashi.

“This continued growth, together with stronger and more business-friendly environments, should enhance their appeal to savvy investors worldwide,” he said.

By Maxwell Awumah