Global foreign direct investment declined in 2023 for a second year running as a result of growing trade tensions, a slowing global economy, and other factors, the UN announced on Thursday.
According to a recent report from the UN Trade and Development agency, foreign direct investment (FDI) decreased by 2% to $1.3 trillion in 2018.
With a few notable exceptions aside, the report warned that FDI had declined by more than 10 percent for the second year in a row.
UNCTAD noted some encouraging advancements but stated that FDI prospects remained “challenging” in 2024.
It cited the easing of financial conditions and concerted efforts towards investment facilitation, “a prominent feature of national policies and international agreements”.
“We think that 2024 will be better,” UNCTAD chief Rebeca Grynspan told reporters in Geneva.
“There are signs that there will be a modest growth 2024,” she said.
“It’s a modest growth, but it’s a change of tendency, and so we are more optimistic towards 2024.”
Since direct investment is typically the greatest external source of financing for developing nations, its decline is particularly detrimental to them.
According to UNCTAD, FDI flows to developing nations decreased by 7% last year to $867 billion, with an additional 8% decline to developing nations in Asia.
In contrast, flows to Africa fell by 3% to $53 billion.
However, UNCTAD said that “a growing share of global mega projects, with six valued at more than $5 billion, are being drawn to the continent.”
The largest greenfield announcement for any country in 2023 was a green hydrogen project in Mauritania, expected to generate $34 billion in investment, the agency said, pointing out that that was “several multiples of the country’s gross domestic product”.
Foreign direct investment flows to developed nations were shown to be significantly influenced by the financial activities of multinational corporations, according to UNCTAD.
It was “partly due to efforts to implement a global minimum tax rate on the profits of these corporations” , according to the statement.
According to the research, immigration to the majority of Europe and North America decreased by 14% and 5%, respectively.
