Global foreign direct investment (FDI) flows fell 13 percent in 2016 to an estimated 1.52 trillion U.S. dollars, in a context of weak global economic growth and a lackluster increase in the volume of world trade, said a report published on Wednesday.
FDI flows to Europe fell 29 percent to about 385 billion dollars, with a number of countries experiencing strong volatility in their inflows, according to the latest report by the United Nations Conference on Trade and Development (UNCTAD) on global investment trends. This decline was tempered by a modest growth of 6 percent in flows to North America and a sizeable increase in investment in other developed economies, principally Australia and Japan, it said.
Slowing economic growth and falling commodities prices weighed on FDI flows to developing economies. Inflows to them fell 20 percent to about 600 billion dollars, due to significant decreases in Asia and in Latin America. "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.
As a result of regional differences, the share of developed economies in world FDI flows as a whole is estimated to have risen further, reaching 57 percent of the total. Nevertheless, developing economies continued to constitute half of the top 10 host economies. The United States remained the largest recipient of FDI last year, attracting about 385 billion dollars in inflows, followed by Britain with 179 billion dollars, up from the 12th position in 2015. China remained in the third position with a record inflow of 139 billion dollars. "Looking ahead, economic fundamentals point to a potential increase in FDI flows by around 10 percent in 2017," Kituyi said. "However, significant uncertainties about the shape of future economic policy developments could hamper FDI in the short term."
UNCTAD warned that significant uncertainties could have a material impact on the scale and contours of any FDI recovery in 2017. Political developments such as the British vote to quit the European Union, policies of the new U.S. administration on key trade agreements such as the North American Free Trade Agreement and the Trans-Pacific Partnership trade deal, as well as recent and upcoming elections in Europe have all heightened uncertainties.
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