Global investment flow slowed 23% in ’17
geneva — Global foreign direct investment (FDI) fell by almost a quarter to $1.43 trillion last year and the outlook is clouded by risks, including trade wars and debt, the United Nations trade and development agency UNCTAD said on Wednesday.
Preliminary figures released earlier this year showed a 16 per cent decline, a surprise downturn led by steep reversals in Britain and the United States.
That has been revised to a 23 per cent fall, with growth expected to be less than 10 per cent in 2018, well below the average over the past decade.
“The report paints a rather depressing picture,” UNCTAD secretary-general Mukhisa Kituyi told a news conference.
UNCTAD investment chief James Zhan said the steeper decline in 2017 was largely caused by a revision of 2016 data, when more funds flowed into US assets than previously thought.
That year marked the end of a wave of “tax inversion” deals, whereby a US firm was acquired by a small foreign business and adopted its domicile to get a lower tax rate.
FDI faced many risks that were not adequately reflected in economic growth forecasts, Zhan said. “Aside from trade tensions going into depth and width, geopolitical tension is also going up, and now the debt issue is coming up, not only for emerging markets but also for Europe,” he told Reuters.
Investments had also slowed because poorer returns and slowdowns in the global value chains that carry over 80 per cent of global trade, Zhan said.
Multinationals were doing fewer big equity deals and more licensing, franchising and contract manufacturing, leaving no footprint on foreign soil.
It was too early to measure the impact of US President Donald Trump’s policies of economic nationalism, but trade tensions would certainly affect FDI, Zhan said.