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    Global FDI Trends

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    Muskan Singhal
    Global FDI flows in 2023 saw a small increase over 2022 but were lower when excluding conduit economies. FDI to developing countries fell while greenfield investments were stable, but project finance and M&As significantly declined. Trends showed declines in most regions and sectors with a few exceptions like manufacturing and West Asia.

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    Global FDI Trends

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    Muskan Singhal
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    Global FDI flows in 2023 saw a small increase over 2022 but were lower when excluding conduit economies. FDI to developing countries fell while greenfield investments were stable, but project finance and M&As significantly declined. Trends showed declines in most regions and sectors with a few exceptions like manufacturing and West Asia.

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    Global FDI flows in 2023 saw a small increase over 2022 but were lower when excluding conduit economies. FDI to developing countries fell while greenfield investments were stable, but project finance and M&As significantly declined. Trends showed declines in most regions and sectors with a few exceptions like manufacturing and West Asia.

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    © All Rights Reserved
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    10 views3 pages

    Global FDI Trends

    Uploaded by

    Muskan Singhal
    Global FDI flows in 2023 saw a small increase over 2022 but were lower when excluding conduit economies. FDI to developing countries fell while greenfield investments were stable, but project finance and M&As significantly declined. Trends showed declines in most regions and sectors with a few exceptions like manufacturing and West Asia.

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    JANUARY 2024 ISSUE 46

    GLOBAL FDI IN 2023 WAS WEAK, WITH LOWER FLOWS


    TO DEVELOPING COUNTRIES
    GREENFIELD INVESTMENT STABLE, PROJECT
    FINANCE AND M&As SIGNIFICANTLY LOWER

    • Global foreign direct investment (FDI) flows in 2023, at an estimated $1.37 trillion,
    showed a marginal increase (+3%) over 2022, defying expectations as recession fears
    early in the year receded and financial markets performed well. However, economic
    uncertainty and higher interest rates did affect global investment. The headline increase
    was due largely to higher values in a few European conduit economies; excluding these
    conduits, global FDI flows were 18% lower.

    • In developed countries, FDI in the European Union jumped from negative $150 billion in
    2022 to positive $141 billion because of large swings in Luxembourg and the
    Netherlands. Excluding those two countries, inflows to the rest of the EU were 23% down,
    with declines in several large recipients. Inflows in other developed countries also
    stagnated, with zero growth in North America and declines elsewhere.

    Figure 1. Investment trends by region, 2023 vs 2022


    Growth rates (%)

    FDI ($ Billions) FDI Greenfield project International project


    numbers finance deals

    World 1 365 +3 (-18)* -6 -21

    Developed
    524 +29 (-28)* -16 -18
    economies

    Europe 70 .. -20 -21

    North America 377 0 -4 -5

    Other developed
    77 -46 -13 -29
    economies
    Developing
    841 -9 +10 -25
    economies

    Africa 48 -1 +9 -31

    Latin America and 0 -12 -24


    209
    the Caribbean

    Asia 584 -12 +17 -24

    Source: UNCTAD, based on FDI/MNE database (www.unctad.org/fdistatistics and information from The Financial Times Ltd,
    fDi Markets (www.fDimarkets.com) and Refinitiv SA.
    * Growth rates in brackets are calculated excluding major conduit economies.
    I T M JANUARY 2024

    • FDI flows to developing countries fell by 9%, to $841 billion, with declining or stagnating
    flows in most regions. FDI decreased by 12% in developing Asia and by 1% in Africa. It
    was stable in Latin America and the Caribbean as Central America bucked the trend.

    • International investment project announcements, including greenfield (mainly industry),


    project finance (mainly infrastructure) and cross-border merger and acquisitions (M&As),
    were mostly in negative territory. International project finance and M&As suffered the
    most from higher financing costs in 2023, with 21% and 16% fewer deals, respectively.
    Greenfield project announcements were also 6% lower in number. However, they were
    6% up in value and showed higher numbers in manufacturing in an initial sign of recovery
    following a long-term declining trend.

    • Noteworthy trends among top recipient economies included:

    o In developed regions, international investment project announcements were


    down across the board. M&A values were $280 billion lower than in 2022, directly
    depressing FDI flows. Project finance deals were $157 billion lower. Lower
    values of greenfield project announcements will affect 2024 FDI flows.
    o In the United States, the largest FDI recipient, FDI inflows in 2023 were down by
    3%, greenfield project numbers by 2% and project finance deals by 5%.
    o China reported a rare decline in FDI inflows (-6%) but showed growth in new
    greenfield project announcements (+8%).
    o ASEAN, normally an engine of FDI growth, reported a 16% decline in FDI.
    However, the attractiveness of the region for manufacturing investment was
    underlined by a 37% jump in greenfield project announcements, with strong
    growth in Viet Nam, Thailand, Indonesia, Malaysia, the Philippines, and
    Cambodia.
    o India reported a drop in FDI inflows (-47%), but stable numbers of new project
    announcements, keeping it in the top 5 of global greenfield project destinations.
    o In West Asia, FDI remained stable (+2%) due to continued buoyant investment
    in the United Arab Emirates, which saw greenfield announcements rise by 28%
    to the second highest number after the United States. Greenfield numbers also
    jumped in Saudi Arabia, by 63%.
    o FDI flows to Africa were almost flat at an estimated $48 billion (-1%). Greenfield
    project announcements increased, mostly due to strong growth in Morocco,
    Kenya, and Nigeria. However, project finance deals fell by one third, more than
    the global average decline, weakening prospects for infrastructure finance flows.
    o In Latin America, Brazil reported 22% lower FDI inflows. While greenfield project
    numbers held steady, international project finance plummeted, with 40% fewer
    deals than in 2022. Mexico reported an increase in FDI, as well as a further
    increase in new greenfield project announcements, solidifying its position among
    the top global recipients.

    • Trends by industry in 2023 show project numbers rose in global value chain (GVC)-
    intensive sectors (+16%), especially in automotives, textiles, machinery, and electronics.
    The number of newly announced greenfield projects in semiconductors fell by 10% (39%
    in value) after the strong growth in 2022. The number of greenfield project
    announcements and international project finance deals in infrastructure industries
    (including transport, power, water, telecommunications) fell by 4 per cent overall, largely
    driven by lower project finance in renewable energy.
    • New international project finance deals in the renewable energy sector fell by 17% in
    number and 10% in value, only marginally less than the overall project finance decline.
    The decline in the number of new projects was the first since the Paris Agreement in
    2015.

    2
    I T M JANUARY 2024

    • The number of international investment projects announced in developing countries in


    sectors relevant to the SDGs – including infrastructure, renewables, water and sanitation,
    food security, health and education – remained flat. The number of SDG-relevant
    international project finance deals declined by 27% (-40% in value). The number of SDG-
    relevant greenfield projects rose by 12% (6% in value). Project numbers in food and
    agriculture rose marginally from low levels in 2022; most other sectors registered a
    decline.
    • Looking ahead, a modest increase in FDI flows in 2024 appears possible, as projections
    for inflation and borrowing costs in major markets indicate a stabilization of financing
    conditions for international investment deals. However, significant risks persist,
    including geopolitical risks, high debt levels accumulated in many countries, and
    concerns about further global economic fracturing.

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