Global flows of foreign direct investment (FDI) fell by 13 per cent in 2016 to an estimated $1.52 trillion as global economic growth remained weak and world trade volumes posted anemic gains, according to the latest UNCTAD Global Investment Trends Monitor.
"FDI recovery continues along a bumpy road," UNCTAD secretary-general Mukhisa Kituyi said. "Particularly of concern is the sharp drop-off in manufacturing investment projects, which play such an important role in generating badly needed productivity improvements in developing economies," he said, adding, "Looking ahead, economic fundamentals point to a potential increase in FDI flows by around 10 per cent in 2017."
"However, significant uncertainties about the shape of future economic policy developments could hamper FDI in the short-term," he added.
The decline of FDI in 2016 was not equally shared across regions, reflecting the heterogeneous impact of the current economic environment on countries worldwide. FDI flows to Europe fell by 29 per cent to an estimated $385 billion, with a number of countries experiencing strong volatility in their inflows. This decline was tempered by modest growth in flows to North America (6 per cent) and a sizeable increase in investment in other developed economies, principally Australia and Japan.
Slowing economic growth and falling commodities prices weighed on FDI flows to developing economies. Inflows to these economies fell by 20 per cent (to an estimated $600 billion) due to significant decreases in developing Asia and in Latin America. Nevertheless, developing economies continue to comprise half of the top 10 host economies. FDI flows to transition economies rose by 38 per cent to an estimated $52 billion.
The wave of cross-border mergers and acquisitions shows signs of ebbing. A 13 per cent increase in the value of net sales, which rose to $831 billion, pales when compared to the 67 per cent and 68 per cent increases registered in 2014 and 2015. Greenfield FDI project announcements value rose by 5 per cent but this was largely due to a handful of very large projects in a few countries. The vast majority of countries, in contrast, registered declines.
"FDI recovery continues along a bumpy road," UNCTAD secretary-general Mukhisa Kituyi said. "Particularly of concern is the sharp drop-off in manufacturing investment projects, which play such an important role in generating badly needed productivity improvements in developing economies," he said, adding, "Looking ahead, economic fundamentals point to a potential increase in FDI flows by around 10 per cent in 2017."
"However, significant uncertainties about the shape of future economic policy developments could hamper FDI in the short-term," he added.
The decline of FDI in 2016 was not equally shared across regions, reflecting the heterogeneous impact of the current economic environment on countries worldwide. FDI flows to Europe fell by 29 per cent to an estimated $385 billion, with a number of countries experiencing strong volatility in their inflows. This decline was tempered by modest growth in flows to North America (6 per cent) and a sizeable increase in investment in other developed economies, principally Australia and Japan.
Slowing economic growth and falling commodities prices weighed on FDI flows to developing economies. Inflows to these economies fell by 20 per cent (to an estimated $600 billion) due to significant decreases in developing Asia and in Latin America. Nevertheless, developing economies continue to comprise half of the top 10 host economies. FDI flows to transition economies rose by 38 per cent to an estimated $52 billion.
The wave of cross-border mergers and acquisitions shows signs of ebbing. A 13 per cent increase in the value of net sales, which rose to $831 billion, pales when compared to the 67 per cent and 68 per cent increases registered in 2014 and 2015. Greenfield FDI project announcements value rose by 5 per cent but this was largely due to a handful of very large projects in a few countries. The vast majority of countries, in contrast, registered declines.
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