Emerging markets' reserves growth slowing, reversing in some countries

LONDON Mon Feb 10, 2014 8:56am EST

A vendor counts money at his photograph stand at Times Square in New York October 14, 2010. REUTERS/Shannon Stapleton/Files

A vendor counts money at his photograph stand at Times Square in New York October 14, 2010.

Credit: Reuters/Shannon Stapleton/Files

LONDON (Reuters) - Central bank reserves in emerging markets, excluding China, grew by $65 billion last month and by $200 billion over the past year, but annual growth has slowed and there were large drops in countries such as Indonesia and Russia.

Reserves stood at $4.19 trillion by end-January 2014, up from $4.12 trillion on Dec 31, 2013 and $3.99 trillion a year ago, the following graphic, based on data provided to Reuters by consultancy CrossBorder Capital, shows link.reuters.com/nyf76v

The data excludes China whose $3.8 trillion stash is almost as much as the combined reserves of all other emerging markets.

But while the healthy reserves - they have quadrupled in the past decade - are proof of changes in emerging markets since the 1994-2002 crisis years, reserve accumulation is starting to stall or at best, become less broad-based.

Reserves rose 5 percent in the past year compared to the 20-30 percent annual increases seen between 2003-2007 or even the 10-20 percent year-on-year rises between 2009-2011.

Reserves are also growing only in some robust economies such as South Korea and Taiwan. Many others are dipping into their coffers to repay debt or to support currencies.

Russian reserves are down $30 billion, while Indonesia and India have lost $8 billion and $4 billion respectively, the following graphic, based on central banks' data show:

link.reuters.com/huf76v

Turkey's $100 billion-plus figure also masks a more drastic fall in net, or useable reserves, that analysts say are around $33 billion, having fallen from $40 billion last summer.

In percentage terms, the most dramatic falls have been in Pakistan which has lost 40 percent of its reserves since January 2013, followed by Argentina and Ukraine.

As the China-fuelled commodity and trade boom dissipates, and capital flows ebb, reserve growth may slow even further.

"The peak of reserve accumulation in emerging markets has already been seen. There is not a great likelihood of big capital inflows for some time," said Michael Howell, managing director of CrossBorder Capital.

"Many countries are seeing a decline in reserves as a proportion of gross domestic product and short-term debt."

(Reporting by Sujata Rao; graphic by Vincent Flasseur; Editing by Andrew Heavens)

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