The year 2018 wasn’t a good year for global foreign direct investment (FDI), as FDI fell by nearly a fifth in the year, to an estimated $1.2 trillion from $1.47 trillion in 2017, according to the latest United Nations Council on Trade and Development (UNCTAD) Global Investment Trends Monitor, released Tuesday January 21, 2019.
In a press release copied to ghanabusinessnews.com, UNCTAD notes that the drop, which is the third in as many years, brings FDI flows back to the low point reached after the global financial crisis, with the decline concentrated in developed countries where inflows fell by as much as 40 per cent to an estimated $451 billion.
The UNCTAD believes that the 2018 FDI decline stems from corporate income tax reform in the United States. It noted that from 2017, United States multinational enterprises have embarked on a large repatriation of accumulated foreign earnings, a move which has hit Europe hard.
In 2018, Europe’s foreign investment inflows amounted to $100 billion – an unprecedented 73 per cent decline – and a value last seen in the 1990s. The United States also saw its inflows dip to $226 billion, a decline of 18 per cent.
Commenting, James Zhan, Director of UNCTAD’s Investment Division said: “The underlying FDI trend has shown anemic growth since the global financial crisis and has been on a downward trajectory since 2013. The factors behind this negative trend, such as lower profitability of foreign investment and shifts in global value chains, are not changing in the near future. The macro-economic backdrop is also deteriorating.”
In contrast, however, global cross-border mergers and acquisitions were up 19 per cent and announced greenfield investments were positive, up 29 per cent, indicating that FDI could improve in 2019, it indicated.
Meanwhile, the report states that developing economies’ FDI flows have been more resilient.
It shows that FDI to developing economies increased by 3 per cent to $694 billion in 2018.
Developing nations accounted for half of the top 10 host economies for FDI inflows.
Of the developing economies, Asia and Africa benefited the most, with flows increasing to developing countries in Asia by 5 per cent, it said.
East and South-East Asia, where inflows were up 2 per cent and 11 per cent respectively, took the lion’s share of foreign investment, accounting for one-third of global FDI in 2018 and almost all growth in FDI to developed economies, it added.
“South East Asia is the main FDI growth engine,” said Mr. Zhan, with the region rebounding from a dip in 2017, buoyed by growth in Indonesia and Thailand.
Greenfield announcements in developing economies rose by 47 per cent reaching an estimated $539 billion and linked to Asian growth prospects, it said.
By Emmanuel K. Dogbevi