Author: Al Emid

Combining pessimism with a moderate amount of optimism in its 2016 outlook for foreign direct investment, the United Nations Conference on Trade and Development (Unctad) forecasts that total FDI flows will fall in 2016 compared with 2015, with the drop varying between what it calls “megagroupings.”

Flows to G20 members could fall by $830 billion to $880 billion, a drop of 5% to 10%, while flows to Asia-Pacific countries are tipped to fall by $760 billion to $810 billion, a decline of 15% to 20% on 2015 levels.

In the October edition of its Global Investment Trends Monitor, Unctad cites the fragility of the global economy, weakness in demand, sluggish growth in commodity exporting countries, the curbing of tax inversion deals and a slump in profits of multinational enterprises as causes of the decline.

Looking ahead, Unctad projects a modest recovery of growth in FDI for 2017, and for 2018 global flows are projected to surpass $1.8 trillion.

“That’s still lower than the $ 2.2 trillion of 2007, which was the pre-crisis level,” said James Zhan, Unctad director of investment and enterprise. The uncertain global economy, policy uncertainty by some governments and geopolitical risks in the Middle East and elsewhere make it unlikely that 2007’s FDI level will be reached again within the short term.

On a region-by-region basis in emerging and frontier markets, Unctad predicts that FDI flows into Latin America and the Caribbean could decline by 10% in 2016, falling to between $140 billion and $160 billion due to weak domestic demand, falling commodity prices and the potential for further currency depreciation.

FDI flows into developing Asian countries will decline by 15% because of the global and regional economic slowdown. Among the Asian economies, China, India, Myanmar and Vietnam could end the year with an increase in FDI.

Flows into Africa, however, could grow by 6%, to $55 billion or $60 billion for the year. “The reason for that is the industrial restructuring taking place, along with flows from China,” Zhan explains. 

Comments

No comments yet

Add a Comment

You must be a registered user with Global Finance Magazine to comment.

Forgot Password?