Global FDI flows fall 8% to $668b first half of 2012 – UNCTAD

Global foreign direct investment (FDI) inflows hit a snag as it declined 8% to $668 billion in the first half year of 2012 from $729 billion during same period in 2011, a new report released by the UN trade agency said October 25, 2012.

The fall was as a result of new setbacks suffered by the economic recovery in the second quarter of 2012, says the UN Conference on Trade and Development’s (UNCTAD) 10th Global Investment Trends Monitor.

Fear of an exacerbation of the sovereign debt crisis in Europe and a slow down of growth in major emerging markets also aided the FDI inflows fall, according to the report.

In the second quarter of 2012, UNCTAD said the value of its FDI Global Quarterly Index, which tracks FDI flows, dropped from 128 to 123.

“The slow and bumpy recovery of the global economy, weak global demand and elevated risks related to regulatory policy changes continue to reinforce the wait-and-see attitude of many transnational companies (TNCs) toward investment abroad,” it said.

“Investment leads economic growth but the current trends of investment flows to developing countries, particularly to Asia, are worrisome and the challenge for channelling FDI into key development sectors such as infrastructure, agriculture and the green economy remains daunting” said Secretary-General of UNCTAD, Dr. Supachai Panitchpakdi.

UNCTAD’s longer term projections still show a moderate rise.

Compared to full year forecast of FDI inflows published in July, UNCTAD now projects that FDI flows will, at best, level-off in 2012, at slightly below $1.6 trillion.

However, it adds that the risk of further macroeconomic shocks in 2013 can impact FDI inflows negatively.

By Ekow Quandzie