Emerging Markets Capital Flows Monitor

Foreign capital inflows into EM financial markets have risen sharply so far this month, as investor risk appetite has improved. But with the global economy set to enter recession, we aren’t convinced that this will last as EMs are likely to find it more challenging to attract foreign capital over the coming months. This is especially worrying for those EMs whose current account deficits have deteriorated sharply such as Chile, Colombia, Turkey and parts of Central and Eastern Europe.