Capital flows to emerging markets down in 2012

Private capital flows to emerging markets are forecast to reach $1,026 billion in 2012, around $10 billion lower than last year, a report from the Institute of International Finance said on Monday.

The report said capital flows to emerging markets will rise modestly to $1,100 billion in 2013. But total private flows will remain significantly lower than at their historic high in 2007, when the figure reached $1,236 billion.

Aggressive easing by the US Federal Reserve, through its commitment to purchase $40 billion of mortgage-backed securities a month until the labor market improves significantly, and the announcement of the European Central Bank's Outright Monetary Transactions' program, should provide support to capital flows to emerging markets, according to the report.

"However, we still expect total flows to fall in 2012 relative to 2011 because bank deleveraging, notably in Europe, has weighed on bank lending flows," said Felix Huefner, deputy director of global macroeconomic analysis at the IIF.