Global FDI flows up 3% in 2023 to $1.37 trn from 2022 figure: UNCTAD

Source:China Sport ShowRelease time:29-Jan-2024Clicks:

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An estimated $1.37 trillion worth global foreign direct investment (FDI) flows last year showed a marginal 3-per cent increase over the 2022 figure, defying expectations as recession fears early in the year receded and financial markets performed well, according to key findings of the 46th Global Investment Trends Monitor by the UN Conference on Trade and Development (UNCTAD).

However, economic uncertainty and higher interest rates did affect global investment. The headline increase was due largely to higher values in a few European conduit economies; excluding these conduits, global FDI flows were 18 per cent lower, UNCTAD said in a release.

Among developed countries, FDI in the European Union (EU) jumped from negative $150 billion in 2022 to positive $141 billion because of large swings in Luxembourg and the Netherlands. Excluding those two countries, inflows to the rest of the EU were 23 per cent down, with declines in several large recipients.

Inflows in other developed countries also stagnated, with zero growth in North America and declines elsewhere.

FDI flows to developing countries fell by 9 per cent to $841 billion, with declining or stagnating flows in most regions.

FDI decreased by 12 per cent in developing Asia and by 1 per cent in Africa. It was stable in Latin America and the Caribbean as Central America bucked the trend.

International investment project announcements, including greenfield (mainly industry), project finance (mainly infrastructure) and cross-border merger and acquisitions (M&As), were mostly in negative territory, the UNCTAD document noted.

International project finance and M&As suffered the most from higher financing costs in 2023, with 21 per cent and 16 per cent fewer deals respectively.

Greenfield project announcements were also 6 per cent lower in number. However, they were 6 per cent up in value and showed higher numbers in manufacturing in an initial sign of recovery following a long-term declining trend.

In the United States, the largest FDI recipient, FDI inflows last year were down by 3 per cent, greenfield project numbers by 2 per cent and project finance deals by 5 per cent.

China reported a rare 6-per cent decline in FDI inflows, but displayed 8-per cent growth in new greenfield project announcements.

The Association of Southeast Asian Nations (ASEAN) regfion, normally an engine of FDI growth, reported a 16 per cent decline in FDI.

However, the attractiveness of the ASEAN region for manufacturing investment was underlined by a 37 per cent jump in greenfield project announcements, with strong growth in Viet Nam, Thailand, Indonesia, Malaysia, the Philippines and Cambodia.

India reported a 47-per cent drop in FDI inflows, but stable numbers of new project announcements, keeping it in the top five of global greenfield project destinations.

In West Asia, FDI remained stable at 2 per cent growth due to continued buoyant investment in the United Arab Emirates, which saw greenfield announcements rise by 28 per cent to the second highest number after the United States. Greenfield numbers also jumped in Saudi Arabia, by 63 per cent.

FDI flows to Africa were almost flat at an estimated $48 billion (minus 1 per cent). Greenfield project announcements increased, mostly due to strong growth in Morocco, Kenya, and Nigeria. However, project finance deals fell by one third, more than the global average decline, weakening prospects for infrastructure finance flows.

In Latin America, Brazil reported 22 per cent lower FDI inflows. While greenfield project numbers held steady, international project finance plummeted, with 40 per cent fewer deals than in 2022.

Mexico reported an increase in FDI, as well as a further increase in new greenfield project announcements, solidifying its position among the top global recipients.