WB’s new data show untapped potential, resilience in emerging markets

Tunis: The World Bank Group's last statistics revealing the credit risk profile of private and public sector investments in emerging markets showed untapped potential and resilience in emerging markets, according a report released on March 28. Two separate reports were provided for the first time ever. The International Bank for Reconstruction and Development (IBRD) shared sovereign default and recovery rate statistics dating back to 1985. This information will help credit rating agencies and private investors gain a deeper understanding of IBRD's credit risk. At the same time, the International Finance Corporation (IFC) is providing private sector default statistics broken down by internal credit rating. The report provides insights that could help private sector investors feel more confident about investing in emerging markets. The IFC's private sector portfolio had a low default rate of 4.1% from 1986 to 2023, suggesting the untapped potential and resilience of private sector investments in emerging mar kets. For investments rated as "weak" by IFC's internal rating system, the default rate was only 2.6% during the period between 2017 and 2023, indicating that even investments considered higher risk can perform better than could be expected. For sovereign borrowers, defaults are rare, averaging just 0.7% annually, and the World Bank typically recovers more than 90% of the amount owed, including both principal and interest. This underscores the World Bank's preferred creditor status and its ability to effectively manage sovereign credit risk. Sovereign default losses range from 0.01% to 58.5%, reflecting the effect of interest rates and length of time in default. The World Bank Group's comprehensive data can inform more nuanced risk assessments, leading to better investment decisions and improved access to capital for emerging markets. This new reporting will support private investment in developing economies - by increasing transparency on historical performance, helping investors gauge risk-reward premiu ms, and bolstering confidence on the state of emerging markets, the WB pointed out. Source: Agence Tunis Afrique Presse

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