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Business News/ Opinion / Online-views/  IMF expects major credit slump in emerging markets
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IMF expects major credit slump in emerging markets

IMF expects major credit slump in emerging markets

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The Reserve Bank of India (RBI) estimates that growth in non-food credit extended by banks is going to be 20% in FY10. At present, it’s about 18.5%, which means that RBI expects credit growth to accelerate this fiscal year. If it does, it’ll place India in a very different position from most other emerging markets. According to the International Monetary Fund’s (IMF) latest Global Financial Stability Report, real credit growth in the emerging markets as a whole is expected to be a negative 3.98% in 2009, -13.22% in 2010 and -15.83% in 2011.

Also See Contraction Ahead (Graphic)

As the chart shows, the only previous year during which bank credit in emerging markets contracted sharply was in 1990 and 1991. Says the report, “Large credit contractions are still likely to materialize in some countries in emerging Europe. Credit growth is set to slow considerably also in Asia and Latin America over the coming years, as banks in these regions are increasingly reluctant to lend with deteriorating economic conditions and rising loan write-downs."

India has been showing robust credit growth so far and Chinese credit growth has been explosive this year. That is perhaps why IMF’s estimates of credit growth for all emerging markets is a relatively less extreme -3.98% this year. What’s worrying is the continuing deterioration forecast in 2010 and 2011, which seems to show that conditions are likely to get progressively worse.

Write to us at marktomarket@livemint.com

Graphics by Ahmed Raza Khan / Mint

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Published: 28 Apr 2009, 09:54 PM IST
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