Menu

The United Nations Conference on Trade and Development said today that 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.

“FDI recovery continues along a bumpy road. 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,” said Mukhisa Kituyi, UNCTAD’s Secretary-General.

The Geneva-based organization said in its latest Global Investment Trends Monitor that the decline in FDI was not equally shared across regions, reflecting the heterogeneous impact of the current economic environment on countries worldwide.

UNCTAD said FDI flows to Europe fell 29 per cent to about $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 commodity prices weighed on FDI flows to developing economies, UNCTAD reported. Inflows to these economies fell 20 per cent (to an estimated $600 billion) due to significant decreases in Asia and in Latin America. Nevertheless, developing economies continue to comprise half of the top 10 FDI host economies. FDI flows to transition economies rose by 38 per cent to an estimated $52 billion.
 
According to UNCTAD, the wave of cross-border mergers and acquisitions is showing 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, respectively.

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.

“Looking ahead, economic fundamentals point to a potential increase in FDI flows by around 10% in 2017," Dr. Kituyi said. “However, significant uncertainties about the shape of future economic policy developments could hamper FDI in the short-term.”