Renewed Investment Flows Let Emerging Markets Defer Hard Choices – Real Time Economics

Local residents crowd to collect free drinking water supplied by a municipal water tanker in New Delhi. Indias new government earlier this month outlined a plan to improve infrastructure, including water supply.

A fresh wave of investment inflows is taking the pressure off some emerging-market governments that had at long last started to tackle economic overhauls.

As investors started fleeing the developing world around this time last year on anticipation of a pickup in the U.S. and Europe, central banks in Turkey, Brazil, India, Indonesia and South Africa raised interest rates to stanch capital flight and many nations promised tough reforms to restore confidence.

Flows have since reversed, sparked by bets that interest rates will remain near zero in the West well into next year, allowing developing nations to defer hard choices and potentially holding back world growth.

Nations that fail to take this moment to improve roads and ports, further liberalize their economies and cut back on red tape to attract foreign businesses are likely to suffer slower economic growth in the years ahead, stalling an important engine of global growth at a time of weakness in industrialized nations, many economists say.

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17 June 2014 | 6:47 am – Source:

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