Global growth will slow in 2025, and offshore investors are set to cut the cash they send to emerging markets by nearly a quarter, as promised policies from incoming U.S. President Donald Trump reverberate through global markets, a banking trade group, the Institute of International Finance (IIF), said on Wednesday.

According to Reuters, the banking trade group stated that the threatened tariffs, a stronger U.S. dollar and slower-than-expected interest rate cuts from the U.S. Federal Reserve are already impacting investor plans.

“The environment for capital flows has become more challenging, tempering investor appetite for risk assets,” the IIF said in its semi-annual report.

The shift is hitting China the hardest, and emerging markets outside China are expected to pull in “robust” inflows in bonds and equities – led by resource-rich economies in the Middle East and Africa.

Already in 2024, China marked its first outflow of foreign direct investment in decades, and total portfolio flows to the world’s second-largest economy are expected to turn negative, an outflow of $25 billion, in 2025.

“This divergence highlights the continued resilience of non-China EMs, supported by improving risk sentiment, structural shifts like supply chain diversification, and strong demand for local currency debt,” the IIF said.

The IIF projected that global growth will moderate to 2.7 per cent in 2025, from 2.9 per cent this year, while emerging markets are set to grow 3.8 per cent.

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