ľ¹ÏÓ°Ôº Group and the are driving transparency and mobilizing private investment in emerging markets through the publication of comprehensive credit risk data. The March 2024 on Recovery Statistics provides insights into the credit risk profile of emerging market economies, highlighting the untapped potential and resilience of private sector investments in emerging markets.
The average default rate in the GEMs report is 3.5 percent (1994¨C 2022), and the International Finance Corporation¡¯s (IFC) analysis of its data for the period 1986¨C2023 indicates a similar trend (4.1 percent). For sub-sovereign lending, the numbers are even better at 2.4 percent. This is roughly comparable to average default rates observed in companies that receive a B credit rating from S&P (3.4 percent) and a B3 from Moody¡¯s (4.0 percent).
GEMs statistics are only one piece of the puzzle that needs to be considered when assessing risks and rewards. But despite the many caveats, this is a formidable set of statistics suggesting that the risks in emerging markets and developing economies may not be as high as often perceived.
Co-founded by IFC and the European Investment Bank in 2009 as a community of practice within the multilateral/development finance institution family, the GEMs Consortium has grown to 25 members as of May 2024 and is expected to continue expanding.
The GEMs Consortium has been publicly publishing annual reports on default rates for both private/sub-sovereign lending and sovereign/sovereign-guaranteed lending since 2020. In March 2024, GEMs published recovery rates for the first time. This report provides statistics derived from pooled GEMs data going back to 1994. Recovery rates are disaggregated by region, income group, and sector¡ªthis level of disaggregation is also the first for a GEMs publication.
The upcomiong GEMs publication, expected in the fourth quarter of 2024, will contain more disaggregated statistics for default and recovery rates by region, income groups, and sectors. Further disaggregation of statistics (e.g., increased sectoral breakdowns, statistics by credit ratings, etc.) is under review.
While there are calls to provide disaggregated GEMS statistics by country, we must assess issues of confidentiality and possible adverse impacts on investor perceptions of certain countries based on potentially smaller sample sizes or specific portfolio-related issues prevailing at the time.
An in-depth market study is being conducted to understand investor demands better and explore avenues for further disaggregation. However, we will always need to work within the confines of data limitations and confidentiality issues. We are also looking to select a new data aggregator to continue enhancing the data collection, aggregation, analysis, and broader dissemination of statistical reports.