International foreign direct investment flows see 2 percent drop last year
Date
6/23/2024 5:40:26 AM
(MENAFN) In 2023, global foreign direct investment (FDI) flows experienced a 2 percent decline, totaling USD1.3 trillion, according to the UN's World Investment Report 2024 released by the UN Conference on Trade and Development (UNCTAD). This decrease was attributed to a combination of economic slowdowns and escalating geopolitical tensions worldwide.
UNCTAD highlighted several factors influencing these FDI patterns, including weakening growth prospects, trade disputes, geopolitical uncertainties, industrial policies, and efforts by multinational enterprises (MNEs) to diversify their supply chains. These factors have collectively contributed to a cautious approach among MNEs towards expanding their operations overseas.
Despite the overall decline, the report projects a modest growth in FDI flows going forward. Factors contributing to this outlook include sustained profitability levels among MNEs, easing financing conditions, and an increase in greenfield project announcements, which involve establishing new facilities or expanding existing ones in foreign countries.
However, the report also noted a significant decline of 26 percent in international project finance deals, which are crucial for infrastructure investments. Tightened financing conditions have been cited as a primary reason for this decline.
Geographically, FDI flows to developing countries saw a notable decrease of 7 percent, amounting to USD867 billion. Within this category, developing Asia experienced an 8 percent decline, while Africa and Latin America and the Caribbean recorded decreases of 3 percent and 1 percent, respectively. In contrast, developed countries saw a 9 percent increase in FDI inflows, reaching USD464 billion.
Interestingly, FDI flows to structurally weak and vulnerable economies, including least developed countries, increased to USD31 billion in 2023, indicating a nuanced trend amid broader declines across regions.
Overall, the UNCTAD report underscores the complex dynamics shaping global FDI trends, highlighting the impact of economic conditions, geopolitical developments, and strategic decisions by multinational corporations on investment flows across different regions and sectors. As global economic uncertainties persist, monitoring these trends will be crucial for policymakers and investors navigating the evolving landscape of international investments.
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