Capital flows to emerging markets are in danger of collapsing this year as the financial crisis in advanced economies risks choking off the supply of credit, an association of large banks warned yesterday.

The Institute for International Finance predicts that net private sector capital flows to emerging markets will be no more than $165bn (€125bn, £116bn) this year, less than half the $466bn inflow in 2008 and just one fifth of the amount sent in the peak year of 2007.

The figures underscore the impact the banking crisis and risk-averse investors are having on emerging market economies, which is one of the key issues at this year’s World Economic Forum in Davos, which starts today.

Financial Times