Debt pressures to pile up on emerging markets amid trade uncertainty, World Bank economist says

Debt pressure is piling up on developing countries and emerging markets from rising trade uncertainty, adding to their woes from high debt levels and sluggish growth, Reuters reports, citing the World Bank Chief Economist Indermit Gill.

About half of the developing countries are now at risk of default or rapidly approaching that point, double the 2024 rate, Gill warned. For emerging markets, net interest payments now account for 12% of their GDP, up from 7% in 2014.

The situation is even worse in poorer countries, where 20% of their GDP goes to debt services, double the rate a decade ago. This is forcing governments to cut back on vital services like healthcare and education.

REMEMBER- The IMF revised its global growth forecast for 2025 to just 2.8%, a 0.5 percentage point cut from its January estimate, warning that further trade tensions would drag growth further down. With decade-high uncertainty indices, global economists expect the World Bank to announce significant cuts to both growth and trade forecasts in June, Gill added.

Global trade is expected to grow by just 1.5%, a significant decrease from the 8% seen in the 2000s. Meanwhile, foreign direct investment now accounts for only 1% of the developing countries’ GDP, a drop from the 5% seen during more prosperous periods, further hindering emerging markets, according to Gill.

The way out? Trade agreements with the US would ease the pressure on emerging markets through tariff reductions and their extension to other countries. “Doing so now made sense,” said Gill, highlighting the World Bank’s models that predict a significant boost to growth with such agreements. Unlike other crises, this one is driven by government policies, which could be reversed, he added.

MARKETS THIS MORNING-

Asian markets are mostly in the green this morning, as Hong Kong’s Hang Seng is up 0.5%, while Japan’s Nikkei is inching up 0.4%. Meanwhile, Wall Street futures remain flat after a day of modest gains for S&P 500, Nasdaq and the Dow.

THE CLOSING BELL-

The EGX30 rose 0.5% at yesterday’s close on turnover of EGP 4.0 bn (10.0% below the 90-day average). Regional investors were the sole net sellers. The index is up 7.7% YTD.

In the green: Rameda (+4.7%), Emaar Misr (+4.0%), and EFG Holding (+2.2%).

In the red: Oriental Weavers (-4.5%), Egypt Kuwait Holding-EGP (-1.1%), and Egypt Alum (-0.9%).

CORPORATE ACTIONS-

#1- Premium Healthcare opened subscriptions for its capital increase, according to adisclosure (pdf). Shareholders can subscribe during the period from 8 May to 3 June, after receiving approval from the Financial Regulatory Authority (FRA). The authority approved raising Premium Healthcare Group’s issued and paid-up capital in March to EGP 2.4 bn from EGP 81.5 mn through the issuance of 22.8 bn new shares. The company also plans to increase its authorized capital to EGP 11.4 bn, up from the current EGP 315 mn.

#2- Arab Developers Holding opened the second phase of its EGP 617.9 mn capital increase, inviting existing shareholders to subscribe to the remaining 109.7 mn uncovered shares, according to a disclosure (pdf). Shareholders will be able to subscribe to the rights issue starting today until the end of the trading day on 4 May.

The second phase follows hot on the heels of the company’s first phase of the rightsissue, which just closed with a 98.2% subscription rate, which saw the firm’s issued capital increase nearly double to EGP 1.4 bn, according to a disclosure to the bourse (pdf).