Foreign direct investment in developing economies fell by 9% in 2023

by MMC
0 comment

A new UNCTAD report shows that FDI flows to countries in the South have fallen to $841 billion amid global weak investment and economic uncertainty.

Foreign direct investment (FDI) flows to developing countries fell by 9% to $841 billion in 2023, according to the latest UNCTAD report. Monitor global investment trendspublished on January 17.

Developing countries in Asia were hardest hit by the decline, recording a 12% drop, while flows to Africa and Latin America and the Caribbean remained more or less stable.

The decline in FDI to developing regions last year occurred against a global backdrop of weak investment and economic uncertainty.

Although global flows defied initial expectations and increased by a slight 3% in 2023 to an estimated $1.37 trillion, “the overall increase was largely driven by higher values ​​in a few economies.” “European” female drivers, the report says.

It is striking to note that excluding these relay economies, global FDI flows show a sharp decline of 18% in 2023.

Developing Asia sees sharp decline in FDI

In 2023, some large developing economies in Asia saw a significant decline in FDI flows, but remained attractive destinations for new projects – when a parent company starts a business in a foreign country by building new facilities operational from scratch.

China reported a rare 6% decline in FDI flows, but saw 8% growth in new project announcements.

Similarly, India saw a 47% decline in FDI flows, but remained among the top five global destinations for new projects.

FDI flows to members of the Association of Southeast Asian Nations (ASEAN), normally a driver of FDI growth, declined by 16%. Yet the group remains attractive for manufacturing investment with a remarkable 37% increase in new project announcements in countries including Viet Nam, Thailand, Indonesia, Malaysia, the Philippines and Cambodia.

In West Asia, FDI remained stable at 2%, supported by sustained investment in the United Arab Emirates, which saw new project announcements increase by 28%, behind the United States, the largest recipient of FDI in the world. Figures for new projects also jumped 63% in Saudi Arabia.

Flows to Africa remain stable

Africa’s FDI flows remained virtually unchanged in 2023, at an estimated $48 billion, a slight decline of 1% from the previous year.

The region has seen an increase in new project announcements, notably in Morocco, Kenya and Nigeria. However, a significant one-third reduction in project finance operations – higher than the global average – is raising concerns about the future of infrastructure finance on the continent.

Contrasting investment trends in Latin America

The investment landscape in Latin America saw contrasting trends in 2023.

Its largest economy, Brazil, saw a 22% decline in FDI flows. While the number of new projects in the country remained stable, international project financing deals fell by 40% compared to 2022.

Meanwhile, Mexico, the region’s second-largest economy, saw a 21% increase in FDI announcements and new projects, strengthening its position as the world’s top beneficiary.

Cautious optimism in the face of global uncertainties

Looking ahead, the UNCTAD report indicates that 2024 could see a slight increase in FDI flows.

“Projections of inflation and borrowing costs in major markets indicate a stabilization of financing conditions for international investment agreements,” it says.

But the report warns of significant risks, including geopolitical tensions, high debt levels in many countries and the threat of new global economic segmentation, all of which cast a shadow over the global investment landscape.

You may also like

Leave a Comment

The news website dedicated to showcasing Africa news is a valuable platform that offers a diverse and comprehensive look into the continent’s latest developments. Covering everything from politics and economics to culture and wildlife conservation

u00a92022 All Right Reserved. Designed and Developed by PenciDesign