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UN reports major decline of FDI in 2012

Posted on Jan 24, 02:06PM | IBNS

Macroeconomic fragility and policy uncertainty for investors has led to an 18 percent decline in global foreign direct investment (FDI) inflows last year, to an estimated USD 1.3 trillion, the United Nations said in a new report released Wednesday.

The Global Investment Trends Monitor, published by the UN Conference on Trade and Development (UNCTAD), added that the 2012 figure is close to that of 2009, when FDI flows reached their lowest level of just slightly over USD 1.2 trillion.

Global FDI had started to recover, reaching USD 1.6 trillion in 2011, according to the agency, which noted that it peaked in 2007, when it was close to USD 2 trillion.

"We thought it was a healthy, steady recovery and now we feel that it will take longer than we expected for the recovery of FDI," said James Zhan, Director of UNCTAD's Division on Investment and Enterprise, who added there was "cautious optimism" for this year and next.

"Our estimate is that in 2013 global FDI may grow by around 7 to 8 percent and in 2014 something like 17 percent," he told a news conference in Geneva. "Having said that, we really feel that the risks are quite strong. Many macroeconomic problems have been contained but not resolved, and they can pop up anytime."

The report - which covers FDI trends in developed, developing, and transition economies, as well as in major developing regions and recipient countries - states that FDI flows fell "drastically" in developed countries to values last seen almost 10 years ago.

"FDI declined sharply both in Europe and in the United States. In Europe, Belgium and Germany saw large declines in FDI inflows," UNCTAD pointed out in a news release.

At the same time, FDI flows to developing economies remained resilient in 2012, reaching USD 680 billion, the second highest level ever recorded. Developing economies absorbed an unprecedented USD 130 billion more than developed countries.

FDI inflows to developing nations in Asia fell by 9.5 percent as a result of declines across most sub-regions and major economies, including China, India, Republic of Korea, Singapore and Turkey.

However, 2012 inflows to Asia were still at the second highest level recorded, accounting for 59 percent of FDI flows to developing countries. FDI flows to China declined slightly but the country continues to be a major FDI recipient - the second largest in the world.

Latin America and the Caribbean as well as Africa witnessed positive growth in FDI in 2012, the agency added.