Global Foreign Direct Investment

July 2, 2013 - PRLog -- Global foreign direct investment (FDI) inflows fell by 18 per cent to US$1.35 trillion in 2012. Recovery to more vigorous investment levels will take longer than expected, mostly because of global economic fragility and policy uncertainty, UNCTAD’s annual survey of investment trends reports.

UNCTAD forecasts FDI in 2013 to remain close to the 2012 level, with an upper range of $1.45 trillion. As macroeconomic conditions improve and investors regain confidence in the medium term, transnational corporations (TNCs) may convert their record levels of cash holdings into new investments. FDI flows may then climb to $1.6 trillion in 2014 and $1.8 trillion in 2015. However, the report warns that factors such as structural weaknesses in the global financial system, the posible deterioration of the macroeconomic environment, and significant policy uncertainty in areas crucial for investor confidence might lead to a further decline in FDI flows. Developing countries took the lead in attracting FDI in 2012. For the first time ever, developing economies absorbed more FDI than developed countries, accounting for 52 per cent of global FDI flows. The report finds that FDI inflows to developing economies nonetheless declined slightly (by 4 percent), to $703 billion – the second-highest level recorded. Among developing regions, flows to Asia and to Latin America and the Caribbean remained at historically high levels, but their growth momentum weakened. Africa saw a year-on-year increase in FDI inflows in 2012.

FDI is also on the rise in structurally weakned economies – comprising the least developed countries, landlocked developing countries, and small island developing States – the report says.

Developing economies’ FDI outflows reached $426 billion, a record 31 per cent of the world total. Flows from developing Asia, Latin America and the Caribbean remained at their 2011 levels. Developing Asia is the largest source of FDI, accounting for three quarters of the developing-country total. In the ranks of the top investors, China has moved up from sixth to third place, after the United States and Japan (figure 2). FDI outflows from Africa almost tripled.