Global FDI flow increases in second quarter of 2009

Global foreign direct investment (FDI) flows experienced a rebound during the second quarter of this year compared with those in the first quarter. However, this flow of FDI is much lower in comparison to the same period last year. The Global FDI Quarterly Index in the second quarter of 2009 was 45 points lower than that a year ago, it said adding that initial indicators for the third quarter show no signs of a further pick-up in FDI flows.
According to the UNCTAD’s Global FDI Trend Monitor, the global FDI quarterly index rose to 115 from 70 in the second quarter.
“The rebound was reflected in G20 economies with a 38 per cent increase in FDI inflows as compared to the first quarter of this year,” said the report. But this rebound was not uniform. For example, the pick-up in the second quarter was particularly marked in some European Union economies such as France, Germany, Spain, Ireland and Sweden, while flows remained relatively low in economies such as the United States or, in a few cases, even declined (e.g. the United Kingdom). In emerging economies, slight increases were observed in Brazil, India and the Russian Federation, while inflows remained practically unchanged in China.
Two factors, however, suggest that the pick-up in the second quarter of 2009 should be treated with some caution. First, the absolute level of FDI flows was considerably lower than that in the same period of 2008 (figure 1), which puts the rebound in perspective. Second, this pick-up seems to be mostly attributable to an increase in intra-company flows and reinvested earning, while equity flows remained unchanged, and at a low level. As equity flows are the FDI component, most directly related to TNCs’ longer-term investments strategies, this suggests that companies remain cautious about their international expansion.
However, this flow of FDI is much lower in comparison to the same period last year. The Global FDI Quarterly Index in the second quarter of 2009 was 45 points lower than that a year ago, it said adding that initial indicators for the third quarter show no signs of a further pick-up in FDI flows.
The report said that overall, global FDI for this year – as a whole is likely to remain sluggish and significantly lower than in last year despite gradual improvement in world business outlook.
In order to provide the international investment community with a timely periodic assessment of global FDI flows, UNCTAD’s Investment and Enterprise Division has launched today the Global Investment Trends Monitor (GITM). The Monitor will be released every quarter of the year (in mid- January, mid-April, mid-July and mid-October). Each issue of the Monitor will provide 1) FDI trends for the latest quarter for which definite data are available, as well as 2) an early indication of trends for the quarter ending just prior to the publication of the Monitor. In order to present the global investment trends clearly, with a view to user requirements, UNCTAD has developed the Global FDI Quarterly Index. This index is based on quarterly data of FDI inflows for 67 countries and economies,2 which together account for roughly 90% of global FDI flows. The index has been calculated from the year 2000 onwards and calibrated such that the average of quarterly flows in 2005 is equivalent to 100.
The current inaugural issue of the Monitor covers global FDI trends in the second quarter of 2009 and also FDI estimates for the third quarters of 2009.

Global FDI Flow Quarterly Index
(2005 = 100)
2008 Q2 – 159.6
2008 Q3 – 132.9
2008 Q4 – 136.2
2009 Q1 – 69.6
2009 Q2 – 114.5