Record high investments in growing economies

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Record high investments in growing economies

Washington, May 30 (DPA) The net flow of private capital to developing countries grew to a record amount of $491 billion in 2005, the World Bank's annual 2006 global development finance report said Tuesday.

Forty percent of the amount was in the form of credit.

The World Bank warned however of the risks involved in high oil prices and growing payments imbalances.

Privatisation, mergers, acquisitions, external debt refinancing and strong interest in investing in local currency bonds helped fuel the investments in Asia and Latin America.

Development aid for the poorest countries climbed to an average of 0.33 percent of the gross domestic products of the wealthy countries - up from 0.22 percent in 2001. But the increase to 427 billion in aid was in large part due to debt forgiveness for Iraq and Nigeria, the World Bank said.

The bank anticipated that the ratio of development aid would climb to 0.36 percent of GDPs by 2010. The UN has aimed, in vain, for 0.7 percent of GDP contributions for the past 35 years.

Developing economies grew at an average of 6.4 percent last year, driven by surging production in China and India. The figure was more than double the 2.8 per cent growth rate in wealthier countries.

But without India and China, other oil-importing developing countries only grew 4.3 percent, down from 5.7 percent in 2004. Growth is nevertheless expected to exceed 5 percent through 2008 in Africa, Asia and Eastern Europe, and close to 4 percent in Latin America, the World Bank said.

'High oil prices, rising interest rates and building inflationary pressures are expected to restrain growth in most developing regions over the next two years, but these regions are still expected to outperform high-income economies,' said Hans Timmer, a senior economist at the World Bank.

Uri Dadush, another bank official, warned that developing countries 'remain vulnerable to further shocks' from higher oil prices, which could include 'overheating in some economies, a disorderly unwinding of global imbalances, a sudden disruption in global oil supply, and the possibility of a decline in the prices of other commodities which have supported incomes in many developing countries.'

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Record high investments in growing economies