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No.25 1 FEBRUARY 2017
EMBARGO
1 FEBRUARY 2017, 17:00 GMT
(12:00 New York, 18:00 Geneva)
GLOBAL FDI FLOWS SLIP IN 2016,
MODEST RECOVERY EXPECTED IN 2017
HIGHLIGHTS
Global FDI flows fell 13% in 2016, reaching an estimated US$1.52 trillion (figure 1), as global economic
growth remained weak and world trade volumes posted anemic gains. This decline was not equally shared
across regions, reflecting the heterogeneous impact of the current economic environment on countries
worldwide.
Figure 1. FDI inflows: global and by group of economies, 2005–2016
Note: World FDI inflows are projected on the basis of 158 economies for which data are available for part of 2016 or full year estimate, as of 23 January 2017.
Annual figures are estimated based on available partial-year data, in most cases up to the third quarter of 2016. The proportion of inflows from these economies
in total inflows to their respective region or subregion in 2015 is used to extrapolate 2016 regional data. Data exclude the financial centres in the Caribbean.
Table 1. FDI inflows, cross-border M&As and announced greenfield projects, by region, 2015–2016 (Billions of US dollars)
FDI inflows Cross-border M&As Announced greenfield project values
Flows to developing economies weaken, led by a decline in Developing
Asia and Latin America
Slowing economic growth and falling commodities prices weighed on FDI flows to developing
economies in 2016. Inflows to these economies fell 20% (to an estimated US$600 billion) in the year,
because of significant falls in Developing Asia and in Latin America and the Caribbean (table 1). There
was a widespread downturn in cross-border M&A activity across developing subregions during the year,
which fell 44% in terms of aggregate value. In contrast, the value of announced greenfield projects rose
19% to reach US$540 billion, but this was largely due to the announcement of a few very large
investments in a small number of countries, as the majority of countries recorded falls.
In Developing Asia the decline in inflows (-22% to an estimated US$413 billion) was relatively
widespread, with every major subregion registering double digit reductions. Nevertheless, in absolute
terms the majority of the decline in flows to the region was centered in Hong Kong (China) – down from
US$175 billion to an estimated US$92 billion – returning to the levels prevailing before the spike in 2015.
FDI inflows in Thailand, Turkey and Singapore also fell sharply in absolute terms. Flows to India fell by
5% to an estimated US$42 billion, but nevertheless ranked among the top ten largest FDI recipient
economies. In contrast, foreign investment in mainland China remained robust rising by 2.3% to a new
record of about US$139 billion. There was a rebound in flows to the Republic of Korea, at US$9.4 billion,
up from their relatively low level of US$4 billion in 2015. FDI to Pakistan also rose significantly (82% to
an estimated US$1.6 billion) as a result of rising Chinese investment in infrastructure.
Economic recession in Latin America and the Caribbean, coupled with weak commodities prices for
the region’s principal exports, factored heavily in the decline in FDI flows to the region (down 19% to
US$135 billion). In South America there were sizable falls in Brazil (from US$65 billion to an estimated
US$50 billion) and Chile (from US$16 billion to an estimated US$11 billion). In Central America, despite
its relatively stronger economic performance, flows also fell led by a 20% reduction in Mexico (from
US$33 billion to US$26 billion).
FDI flows to Africa also registered a decline (-5% to US$51 billion), with the region sharing similar
external vulnerabilities with Latin America. The low level of commodity prices continues to have an
impact on resource-seeking FDI. Flows to Angola more than halved after surging in 2015. Mozambique
saw its FDI fall 11%, but the level was still significant at an estimated US$3 billion. However, there was
some uptick in flows to parts of Africa, centred on traditional FDI recipients such as Egypt (from US$6.9
billion to US$7.5 billion) and Nigeria (from US$3.1 billion to US$4 billion). Similarly South Africa saw a
38% increase in FDI inflows, though they remained at a relatively low level of US$2.4 billion
FDI flows to transition economies rose by 38% to an estimated US$52 billion. This largely reflected a
doubling of inflows in Kazakhstan (from US$4 billion to US$8.1 billion) as well as a 62% uptick in flows
to the Russian Federation (from US$12 billion to an estimated US$19 billion). In Kazakhstan rising FDI
flows were associated with a strong increase in mining exploration activities. In the Russian Federation
the increase is principally attributed to investments associated with the privatization of state-owned assets:
the government sold a 19.5% stake in the state-owned oil company Rosneft in a deal worth around US$11
billion to a consortium led by Glencore (Switzerland) and the Qatari sovereign wealth fund.
The wave of cross-border M&As shows signs of ebbing, while greenfield
announcements hint at stagnant capital expenditures by MNEs
Cross-border M&A activity remained substantial in 2016, reaching a new post-2007 high, but showed
signs of slowing during the course of the year (figure 4). The 13% increase in the value of net sales, which
rose to US$831 billion, pales when compared to the 67% and 68% increases registered in 2014 and 2015.
Nevertheless, sales in Europe also grew at markedly slower rates compared with those of previous years.
The volume of cross-border M&As in developing and transition economies fell sharply in value terms
(-44% and -52%, respectively), leaving their share in the global total at just 6%, compared with an
average of 19% for the 2006–2015 period.
Figure 4. Value of cross-border M&As and announced greenfield investment projects, 2007–2016a