2015 has not started as well as hoped. Activity data have disappointed in Q1 and business confidence has deteriorated. The IIF again revised down its global forecast and now projects growth of 2.8%, unchanged from 2014. We still peg 2015 as a year of divergence, but the rotations implied by these divergences, such as a pick-up in growth in oil importing countries, are materializing only slowly. Looking ahead, momentum should increase during the course of the year and into 2016, when annual growth should rise to 3.3%. However, risks remain tilted to the downside.
This paper provides a concise summary of the vast literature on the drivers of capital flows to emerging markets. The importance of different drivers varies across different kinds of capital flows (Figure 1). External "push" factors like U.S. interest rates and global risk aversion matter most for portfolio flows. By contrast, domestic "pull" factors like growth and country risk are most important for banking flows.
On April 17, the IIF Senior Accounting Group (SAG) submitted its response letter on the IASB’s proposal to amend IAS 7. The proposal aims to address investors’ need to better understand an entity’s period-on-period movements in debt and of any liquidity restrictions that affect an entity’s ability to deploy its resources. While the IIF SAG agrees that these issues are also critical for the banking industry, the current proposal raises a number of concerns that are developed in the attached letter.