foreign direct investment

Reduced foreign direct investment

Global private equity fell to $1.2 trillion in 2018 from $1.47 trillion in 2017, according to the latest report of the United Nations Conference on Global Investment Trends (UNCTAD) published on Monday, which showed weak performance by Nigeria and Angola.
Such weak performance was the first in many years and has already led to a return to FDI in the aftermath of the global financial crisis. By the way, the decline was mainly concentrated in developed countries, where inflows had declined by 40 per cent to an estimated $451 billion.
According to UNCTAD, FDI in developing countries increased by three per cent to 694 billion, of which Asia and Africa benefited the most. In addition, investment in developing countries in Asia increased by 5 per cent.
Experts also noted a slight increase in foreign direct investment in Africa (from $38 billion in 2017 to $40 billion in 2018). In particular, in South Africa the growth was 446%, in Egypt by 7%, and in Nigeria by 36%.
According to James Jean, Director of UNCTAD’s Investment Division, the main trend in FDI showed anemic growth after the global financial crisis, and has been on a downward trajectory since 2013. He predicted that the reasons that created this environment would not be resolved any time soon. Namely, the decline in foreign investment returns and changes in global price chains. James Jean also stressed that today one can see how the macroeconomic background is only getting worse.

Volume of foreign direct investment: regional analysis

According to a UN report, the decline in FDI in 2018 was directly due to the corporate income tax reform that was adopted in America. Starting from 2017, the U.S. multinational corporations began repatriating their accumulated foreign income, which hit Europe hard.

In 2018, investments in Europe amounted to $100 billion, which is strikingly low compared to previous years. In America it was also possible to notice a decrease in inflow to 226 billion dollars, that is minus 18%.
But the level of global cross-border mergers and acquisitions rose by 19%, indicating that FDI could improve in 2019.
East and Southeast Asia, where inflows grew by 2 percent and 11 percent respectively, accounted for the lion’s share of foreign investment, accounting for one-third of global FDI in 2018, and almost all FDI growth in developed countries.
According to James Jean, these regions were the main drivers of foreign direct investment growth last year and will continue to influence the foreign economy in 2019.