Global FDI falls 18% to $1.3 trillion in 2012 as recovery woes deepen

Global foreign direct investment (FDI) inflows dipped by 18% in 2012, the United Nations has said.

The year 2012 recorded $1.3 trillion FDIs as against $1.6 trillion registered in 2011, according to an investment report published January 24, 2013 by the UN Conference on Trade and Development (UNCTAD).

“The strong decline of FDI flows is in stark contrast to other macroeconomic variables, including gross domestic product (GDP), trade and employment growth, which all remain in positive territory,” UNCTAD said in its Global Investment Trend Monitor.

The UN trade agency stated that the FDI recovery that had started in 2010 and 2011 “will now take longer than expected”.

However, UNCTAD predicts that flows “could rise moderately to $1.4 trillion in 2013 and $1.6 trillion in 2014” pushed by slight improvements in macroeconomic conditions and the reprofiling (e.g. releasing record cash reserves for investment) of transnational corporations).

The agency warns that persist structural weaknesses in major developed economies and in the global financial system as well as significant policy uncertainty in areas crucial for investor confidence could further delay FDI recovery if not solved.

The report indicated that FDI flows to developed countries in 2012 fell drastically to $550 billion, a level last seen almost ten years ago with sharp decline witnessed in Europe and the United States.

FDI flows to developing economies remained resilient in 2012, declining by only 3% to $680 billion, UNCTAD says.

It added that developing economies absorbed an unprecedented $130 billion more than developed countries.

By Ekow Quandzie