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FACT SHEET: EMERGING MARKETS AT A GLANCE

Year 2006 will be 50-Year Milestone for the “Emerging Markets”

Concept Born with the Founding of International Finance Corporation,

Private Sector Financing Arm of World Bank Group

Macroeconomic Growth and Poverty Reduction

The GDP of emerging market countries as a group has been growing at roughly double the rate of advanced economies in recent years. Aggregate GDP of the developing countries grew 6.6 percent in 2004, while the GDP of high-income nations grew at 3.1 percent. Source: World Bank’s Global Development Finance 2005 , pp. 33-34.

The expansion among high-income countries is projected to be stable during 2006, at about 2.5 percent, before picking up a bit in 2007. Growth in developing economies is projected to be 5.9 percent for 2005 and to remain above 5.5 percent for 2006 and 2007 . Source: World Bank’s Global Economic Prospects 2006 , p. 1.

Poverty levels are still high but slowly decreasing for the emerging market countries as a whole. From 1990 to 2002, the percentage of people in the developing world living on less than $1 per day dropped from 27.9 percent to 21.1 percent. The percentage of population in the developing world living on less than $2 per day dropped from 60.8 percent to 49.9 percent. Source: World Bank’s Global Economic Prospects 2006 , p. 9.

Cross-Border Capital Flows

For every $1 dollar in official development aid to the governments of developing countries, some $4 in cross-border private investment now takes place . Net foreign assistance from official sources (aid, debt, and grants) is an estimated $70 billion, while private flows (debt and equity) are roughly $300 billion. Source: Global Development Finance 2005, p. 14.

Private capital flows to emerging markets, as a percentage of their GDP, are now more than four times net official aid flows . Source: Global Development Finance 2005, p. 14.

Foreign Direct Investment

The share of foreign direct investment (FDI) and portfolio equity in the finance mix of many developing countries has grown in recent years—a trend that enhances stability . Equity flows accounted for 80 percent of total external financing to developing nations during 1999–2003 , compared with just 60 percent during 1993–98. Source: Global Development Finance 2005, pp. 6-7.

Reported FDI outflows from developing countries have surged dramatically , reaching an estimated $40 billion in 2004 (from only $3 billion in 1991) and becoming an important source of capital investment in the global economy. The bulk of these FDI outflows originated in countries that have been major recipients of inflows in recent years. Source: Global Development Finance 2005, p. 2.

In a recent A.T. Kearney survey of global executives regarding their most-preferred destinations for foreign direct investment , two emerging market nations, China and India, ranked higher than the United States. Source: A.T. Kearney FDI Confidence Index .

Emerging Market Stock Market Growth and Equity Flows

The market capitalization of emerging market countries has more than doubled over the past decade, growing from less than $2 trillion in 1995 to almost $5 trillion . As a percentage of world market capitalization, emerging markets are now more than 12 percent and steadily growing. Source: Standard & Poor’s Global Stock Markets Factbook 2005 .

Net equity flows (foreign direct investment and portfolio flows) to the emerging markets have grown to roughly $200 billion per year , providing an important source of capital for development. Source: Global Development Finance 2005, p. 14.

Emerging Market Bond Markets

Over the past decade, emerging market bond markets have deepened markedly . The issuance of international securities by emerging market sovereigns and corporates has increased from a level of $325 million in 1995 to roughly $700 million in 2003. Meanwhile, the level of domestic bond issuance by emerging markets issuers over the same period has increased from $1 trillion to $2.4 trillion. Source: Fitch Ratings.

Since 2002, due to rising liquidity, low inflation, and increases in saving rates, spreads on emerging market bonds have been cut by more than half , from more than 800 basis points to less than 400 basis points. Source: World Bank’s Global Economic Prospects 2006 , pp. 11, 12; Datastream; EMBI.

Emerging market debt trading volumes exceeded $1.3 trillion for the third quarter of 2005, approaching the peak of $1.62 trillion that was seen in 1997. Source: Emerging Markets Traders Association.

What It Means for the Average Citizen

Over the past decade, institutional investors— pension funds , foundations, and endowments—have increased their emerging market allocations from 9.67 percent of their total assets under management to more than 16 percent, representing more than $1 trillion in investment . Source: Intersec, Research Unit of State Street Corp.