WorldEconomy4 days ago

Developing-Country Risk Is Being Mispriced

The article discusses how developing countries' risks are being overestimated by financial markets, leading to higher risk premiums and misallocation of capital. It references the newly released Global Emerging Markets (GEMs) Risk Database, which highlights a significant gap between actual default and recovery rates in developing economies and the assumptions used by markets.

en English

Economics

Jun 17, 2026

Vera Songwe

and Mahmoud Mohieldin

When investors say there are no “bankable” projects in developing economies, they are typically referring less to project quality than to the cost of capital. But the assumptions driving up risk premia are not supported by the evidence, and until this changes, the misallocation of capital will continue to undermine development.

YAOUNDÉ/CAIRO—Evidence of markets’ systematic overestimation of risk in developing economies has been piling up for years. The latest addition is the new release of the Global Emerging Markets (GEMs) Risk Database, which shows a sharp disconnect between developing economies’ default and recovery outcomes and prevailing market assumptions.

Read the full article at Project Syndicate →

Source document: Global Emerging Markets (GEMs) Risk Database

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Project SyndicateIndependentCenter4 days ago

Developing-Country Risk Is Being Mispriced

Bias read (Center): The article presents an economic argument without overtly favoring any political ideology. It focuses on market behavior and data analysis rather than policy positions or ideological debates.

Official sources cited

data Global Emerging Markets (GEMs) Risk Database

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dataGlobal Emerging Markets (GEMs) Risk Database