African Economic Outlook: Egypt "Most Attractive" for Short-term Investments in Africa

The “African Economic Outlook 2023” report stated that the exit of portfolio investments “short-term investments in bonds” from emerging African markets that began in 2020 continued during 2021 with an exit of $27.5 billion in financial inflows, after $ 8.1 billion in outflows in 2020.

The report issued during the annual meetings of the African Development Bank Group (AfDB) in Sharm El-Sheikh stated that this continuous sale of assets highlights the sensitivity of portfolio investments to changes in the global and local financial environment, in contrast to foreign direct investment (FDI), which has proven to be more resilient in the face of economic shocks.

The report indicated that the recent increases in interest rates by central banks, especially in advanced economies, and the more tightening global financial conditions affected the exit of capital flows, with the accompanying pressures on current interest rates and interest rates in emerging and developed economies, which have become particularly vulnerable, as it resulted in capital flight.

The report added that recent bank defaults could lead to increased global financial instability and exacerbate capital outflows from the continent.