World Bank urges investors to explore developing economies

The World Bank Group has stated that they would encourage investors to look at the untapped opportunities in emerging markets with fresh eyes.

A recent statement on the website of the multilateral lender stated that the proprietary statistics revealed the credit risk profile of private and public sector investments in emerging markets.

“Making this data publicly available is the latest in a concerted effort to drive more private sector investment to emerging and developing economies,” the bank noted.

Two separate reports the World Bank recently released include the International Bank for Reconstruction and Development sharing sovereign default and recovery rate statistics dating back to 1985 and the International Finance Corporation providing private sector default statistics broken down by internal credit rating.

Speaking on the reports, the World Bank Group president Ajay Banga, said, “We believe our proprietary information should be a global public good and sharing it will provide transparency and inspire investor confidence. The publication of this data is aimed at one goal: getting more private sector capital into developing economies to drive impact and create jobs.”

The IBRD  report showed sovereign default data covering the period 1985 to 2023 while the IFC’s private sector default statistics have been compiled over nearly 40 years and published as a standalone report to respond to the urgent need of investors for emerging market insights.

Key statistics from the reports revealed that the IFC’s private sector portfolio had a low default rate of 4.1 per cent from 1986 to 2023, suggesting the untapped potential and resilience of private sector investments in emerging markets.

“For investments rated as ‘weak’ by IFC’s internal rating system, the default rate was only 2.6 per cent during the period between 2017 and 2023, indicating that even investments considered higher risk can perform better than could be expected.

“For sovereign borrowers, defaults are rare, averaging just 0.7 per cent annually, and the World Bank typically recovers more than 90 per cent of the amount owed, including both principal and interest. This underscores the World Bank’s preferred creditor status and its ability to effectively manage sovereign credit risk and sovereign default losses range from 0.01 per cent to 58.5 per cent, reflecting the effect of interest rates and length of time in default,” part of the statement read.

The World Bank maintained that the new reporting would support private investment in developing economies by increasing transparency on historical performance, helping investors gauge risk-reward premiums, and bolstering confidence in the state of emerging markets.