News
Global foreign direct investment fell 13% in 2016, but modest recovery expected in 2017 – new figures
Global flows of foreign direct investment (FDI) fell 13% 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. 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,” UNCTAD Secretary-General Mukhisa Kituyi said.
“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.”
The decline of FDI in 2016 was not equally shared across regions, reflecting the heterogeneous impact of the current economic environment on countries worldwide. Falling FDI flows to Developing Asia and Oceania (-22%), Latin America and the Caribbean (-19%) and Africa (-5%) reduced the global total.
FDI flows to Europe fell 29% 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%) 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 20% (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% to an estimated $52 billion.
The wave of cross-border mergers and acquisitions shows signs of ebbing. A 13% increase in the value of net sales, which rose to $831 billion, pales when compared to the 67% and 68% increases registered in 2014 and 2015. Greenfield FDI project announcements value rose by 5%, 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 flows to Africa
Slowing economic growth and falling commodities prices weighed on FDI flows to developing economies in 2016. FDI flows to Africa registered a decline (-5% to US$51 billion), with the region sharing similar external vulnerabilities with Latin America. The low level of commodity prices continues to have an impact on resource-seeking FDI. Flows to Angola more than halved after surging in 2015. Mozambique saw its FDI fall 11%, but the level was still significant at an estimated US$3 billion. However, there was some uptick in flows to parts of Africa, centred on traditional FDI recipients such as Egypt (from US$6.9 billion to US$7.5 billion) and Nigeria (from US$3.1 billion to US$4 billion). Similarly South Africa saw a 38% increase in FDI inflows, though they remained at a relatively low level of US$2.4 billion
(Billions of US dollars)
(Billions of US dollars)
