Declining EM public investments

FT points to an alarming decline in public investments in developing countries. Sample this

The share of national output developing world governments are spending on investment in assets such as schools, hospitals and transport and power infrastructure, net of depreciation of the existing capital stock, has fallen from 3.3 per cent in 1997 to a low of just 0.9 per cent last year, according to data from the IMF.

"Rigidities on wage bills and transfers" coupled with rising public debt-to-GDP ratios have been held responsible for this declining trend in investments.

Even if strip our China, which has experienced a steep decline in net investment, thanks to depreciation from its investment splurge of recent years, the weighted average for the rest of EM work is 3.9 per cent of GDP, lower than the 4.8 per cent of 2010. This is a major cause for concern given the acute need for increasing the rate of capital accumulation in these economies.