Global foreign direct investment (FDI) flows exceeded the pre-crisis average in 2011, reaching $1.5 trillion despite turmoil in the global economy, a new UN investment report said July 5, 2012.
Even though inflows rose in 2011 by 16 per cent compared to $1.24 trillion in 2010, however, they still remained some 23% below their 2007 peak, according to the 2012 World Investment Report (WIR) published by the UN Conference on Trade and Development (UNCTAD).
The report indicated that the rise of FDI flows will lose momentum at the end of 2012.
UNCTAD predicts “slower FDI growth in 2012, with flows levelling off at about $1.6 trillion. Leading indicators – the value of cross-border mergers and acquisitions (M&As) and greenfield investments – retreated in the first five months of 2012,” the WIR said.
The UN agency’s longer-term projections show a moderate but steady rise, with global FDI reaching $1.8 trillion in 2013 and $1.9 trillion in 2014, barring any macroeconomic shocks.
It argues that the fragility of the world economy, with growth tempered by the debt crisis and further financial market volatility, will have an impact on flows.
Both cross-border M&As and greenfield investments slipped in the last quarter of 2011 and the first five months of 2012, the report observed.
The number of M&A announcements, although marginally up in the last quarter, continues to be weak, providing little support for growth in overall FDI flows in 2012, especially in developed countries.
In the first quarter of 2012, UNCTAD said the value of its Global FDI Quarterly Index declined slightly – a decline within the range of normal first-quarter oscillations.
FDI inflows increased across all major economic groupings in 2011. “Flows to developed countries increased by 21 per cent, to $748 billion. In developing countries FDI increased by 11 per cent, reaching a record $684 billion. FDI in the transition economies increased by 25 per cent to $92 billion,” the WIR stated.
Developing and transition economies respectively accounted for 45 per cent and 6 per cent of global FDI, according to the report as UNCTAD’s projections show “these countries maintaining their high levels of investment over the next three years”.