United Nations Conference on Trade and Development

JAKARTA (TheInsiderStories) – The global flow of foreign direct investment (FDI) in 2017 fell by 16 percent to US$1.5 trillion, from US$ 1.8 trillion in 2016, according to a new report released by United Nations Conference on Trade and Development (UNCTAD).

The text of the UNCTAD ensured that the fundamental factor of the global decline in FDI is due to the drop in investment in developed countries.

A strong decrease in flows was reported in Europe (-27 per cent) as well as in North America (-33 per cent), mainly due to a return to prior levels of inflows in the United Kingdom and the United States after spikes in 2016.

This decline was tempered by an 11 per cent growth in flows to other developed economies, principally Australia.

FDI inflows: global and by group of economies, 2005-2017
(Billions of US dollars)

Source: UNCTAD, 2018.

FDI to developing economies remained stable, at an estimated US$653 billion, 2 per cent more than the previous year. While there was a slight increase in Asia, Latin America, and the Caribbean although they remained stable in Africa.

These data contrast with other macroeconomic variables such as the growth of the Gross Domestic Product and trade, which experienced substantial improvements in 2017, the agency said.

“The recovery of FDI continues along an uneven road. Although it remained at a similar level to that of last year in developing countries, greater investment is still urgently needed in sectors that can contribute to the Sustainable Development Goals,” the UNCTAD secretary general Mukhisa Kituyi said in a statement.

The UNCTAD Global Investment Trends Monitor also showed that, after three years of growth, cross-border mergers and acquisitions (M&As) declined in 2017.

M&A growth had already slowed in 2016, and went on to contract by 23 per cent in 2017, to US$666 billion. However, this still represented the third-highest level since 2007.

Value of cross-border M&As, 2007-2017
(Billions of Us dollars)

Source: UNCTAD, 2018.

Preliminary data on the value of announced greenfield FDI projects show a decline of 32 per cent to US$571 billion, or 17 per cent in number of projects, their lowest level since 2003.

If confirmed, the drop in greenfield project announcements would be a negative indicator for the longer term.

Of particular concern is the near halving of the value of project announcements in developing economies, although the fall in project numbers was limited to 23 per cent.

Email: elisa.valenta@theinsiderstories.com