World Bank predicts drop in FDI in developing countries

Developing countries will suffer a dip in foreign direct investments (FDI), the World Bank has said.

It is projected that there would be a drop in FDI to the tune of $180 billion in 2009.

The effect of this fall would be felt in 10 of the world’s countries that receive about 65% of FDI.

“In 2008, for the first six months we saw quite a large amount of FDI going to China, India and even Egypt. But in 2009 some of these middle income countries including FDI related to commodity price boom will be affected,” Mansoor Daialmi, Manager of International Finance  in the World Bank’s Development Economics Vice Presidency told the BBC in an interview monitored by Thursday January 22, 2009.

As a result growth is expected to slow down in most developing countries relative to 2008.

According to Daialmi, generally, the service, mining, financial sectors and natural resource development which are related to commodity price movements will be affected.

The Bank suggested that the only way these countries could absorb the shock of the side effects of the drop in FDI is for these countries to remain on the good cause of macroeconomic policies of the last five years, which has so far insulated them from the effects of the global financial crisis.

At the beginning of the crisis, many expected developing countries to be hard hit, but so far, these countries have not been as hard hit as expected, and that is attributed to the kind of macroeconomic policies they have been practicing.

As at 2006 Ghana attracted about $450 million of FDI, according to the World Bank, but it is not clear yet how the drop in FDI across the world would affect the country.

By Emmanuel K. Dogbevi

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