Credicorp Capital: “investment flows to emerging markets have no growth prospects in 2023”

Investment flows in emerging markets, such as Peru, do not have a clear growth projection for next year and certainty will not recover until the United States Federal Reserve (Fed) normalizes its cycle of economic interventions, said Diego Camacho, international research economist at Credicorp Capital.

The US organization has been raising the reference interest rates monthly to discourage consumption in the main world economy and, with this, reduce the inflation.

“The investment flows towards emerging markets do not have a clear perspective of growth in 2023. In that year it will be activated very quickly when the market is clear that the normalization cycle [de la economía] in the United States has ended and when that materializes we believe that there is a very important opportunity for the investment flows in portfolio towards our economies are reactivated”, indicated Camacho at the event “Economic Perspectives 2023, waiting for the pivot from the fed and definitions on internal reforms”, organized by Credicorp Capital.

This possible reactivation before the normalization of the economic policies would occur because the investment funds have a high level.

“The cash position of investment funds is at a very high level, a level that is compared to figures seen in 2001, which means that when there is complete clarity that the fed has completed its normalization cycle, an inversion cycle can be activated. That is much more likely to be clear in the second part of 2023, because the first part of 2023 would still be the challenge of the inflation”, he added.

Based on this, he pointed out that the central banks of emerging countries would only have greater clarity in the second half of the year regarding the possibility of reducing interest rates. So far this year, these countries, including Peru, have increased the reference rate to try to mitigate the effects of the inflation global.

On the other hand, he indicated that the international market considers that if the United States reaches a recession, it would not have a very serious impact on citizen consumption due to people’s ability to save.