Global foreign direct investment (FDI) inflows, cross-border mergers and acquisitions (M&As) -- the main mode of FDI -- drastically declined in the last quarter of 2008, and the fall has continued into 2009, United Nations Conference on Trade and Development (UNCTAD) data reveal.
FDI inflows dropped by 54 per cent and M&As by 77 per cent during the first quarter of 2009 as compared to the same period last year. Prospects for FDI will remain gloomy for the rest of the year, UNCTAD economists say
A renewed commitment by policy makers to an open environment for international investment will play an important role in maintaining favourable conditions for a recovery in FDI flows," UNCTAD Secretary-General Supachai Panitchpakdi said of the first quarter results. UNCTAD has been closely monitoring investment policy developments at both national and international levels.
According to UNCTAD, the data on FDI flows available for the first quarter of 2009 reveal a drastic plummet. The 54 per cent decline was apparent among the 57 countries for which quarterly data on FDI inflows were available as of mid-June 2009 (which account for roughly 60 per cent of global inflows). Forty-three countries, including major host countries such as Brazil, China, and the Russian Federation, recorded declines.FDI outflows for the same period fell by 57 per cent for 47 countries (accounting also for about 60 per cent of global FDI outflows) for which such data are available
Thus, the majority of these countries (37 out of 47), including major investors such as France, Germany, Japan, and the US, experienced declines in FDI outflows in the first quarter of 2009.
Recent data on cross-border M&As confirm this trend: they decreased by 77 per cent for all countries in value in the first quarter of 2009 as compared to the first quarter of 2008, and by 62 per cent over the last quarter of 2008. All three groups of economies -- developed countries, developing countries, and transition economies -- experienced falls in cross-border M&As. If the first quarter trend continues, projections for the whole of 2009 are for global FDI inflows to drop by close to half. While developed countries are mainly responsible for the fall of FDI in 2009 -- they have experienced a nearly 60 per cent decline -- unlike in 2008, developing countries and transition economies are also this time experiencing declines
For developing nations, the reduction is expected to be as much as 25 per cent and for transition economies as much as 40 per cent.