Non-resident capital inflows into the Mena region are forecast to jump by 21% in 2019 – from $165 billion to $200 billion.
The prediction comes from the Institute of International Finance (IIF) which credited the index upgrades for a number of Gulf Co-operation Council (GCC) states as the primary reason for the jump in inflows.
Portfolio investments remain the key source of capital inflows to the region hence the importance of the index upgrades. The IIF’s report cites the inclusion of Saudi Arabia in the MSCI Emerging Market Index as being responsible for two-thirds of the additional inflows in 2019.
“Unlike in other emerging markets where capital flows dynamics have been significantly affected by global monetary easing and trade tensions, the main driving factor behind this year’s foreign capital inflows to Mena has been global benchmark index upgrades in the GCC,” said Garbis Iradian, chief economist for Mena at IIF.
The economic think tank also warns that capital inflows in the region are likely to tail off in 2020, reaching only $173 billion, according to its forecasts. “Going forward, we expect equity inflows to dissipate somewhat but remain sizable. From the perspective of debt flows, declining interest rates and large fiscal financing needs in the context of lower oil prices will keep Eurobond issuance at high levels,” added Iradian.
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