Summary of Capital Slowdown

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7 Overall

8 Importance

7 Innovation

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Recommendation

Investment growth in the emerging and developing economies sank precipitously between 2010 and 2016, and the rate in 2016 fell far short of the double-digit gains posted before the 2008 financial crisis. In this brief but illuminating article, economists M. Ayhan Kose, Franziska Ohnsorge and Lei Sandy Ye explore the reasons for the ongoing low investment, why that development makes it difficult for these countries to reduce poverty and how governments can spur investment. getAbstract recommends this expert analysis to investors and executives.

In this summary, you will learn

  • Why an extended decline in investment growth has taken place in the emerging and developing countries,
  • How low investment hampers poverty reduction and economic growth, and
  • What policy makers can do to improve investment levels.
 

About the Authors

M. Ayhan Kose is a director at the World Bank, where Franziska L. Ohnsorge is a lead economist and Lei Sandy Ye is an economist.

 

Summary

The annual rate of investment growth in the emerging and developing economies declined from 10% in 2010 to less than 3.5% in 2016. The slump is widespread, occurring in close to two-thirds of those nations. The BRICS – Brazil, Russia, India, China, and South Africa – and countries dependent on commodity exports are especially hard hit. China is responsible for about one-third of the drop in the BRICS’ investment growth; both Brazil and Russia account for an additional one-third. In contrast, investment growth rates in the developed nations had recovered to their long-term historical averages by 2014.


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