Emerging Economies Face High Risks from Iran War, IMF Warns
IMF analysis shows emerging markets reliance on market investors like hedge funds contributed to $4tn in inflows, heightening vulnerability to interest rate and currency shocks from Iran conflict.
Emerging economies are at greater risk of higher interest rates and currency shocks as a result of the Iran war because of increased reliance on market investors such as hedge funds, the International Monetary Fund has warned.
The IMF's analysis shows that a cumulative $4 trillion flowed into emerging markets last year from outside the formal banking sector – including from hedge funds and investment funds. This heavy influx of market-driven capital has heightened the vulnerability of these economies to volatility stemming from the conflict with Iran.
{{IMAGE_PLACEHOLDER}}According to the IMF, emerging economies tend to be more reliant on these types of portfolio investments rather than traditional bank lending. This makes them more susceptible to sudden shifts in investor sentiment and capital flight in times of geopolitical uncertainty or economic turmoil.
Source: The Guardian
