Global tensions hit investments again in 2023: UN

AFP , Friday 21 Jun 2024

Worldwide foreign direct investment fell for a second consecutive year in 2023 amid a global economic slowdown, coupled with swelling trade and geopolitical tensions, the United Nations said Thursday.

Aerial view of the Callao Port Terminal in Callao, Lima, taken on June 20, 2024. AFP


Foreign direct investment (FDI) fell by two percent to $1.3 trillion last year, according to a fresh report from the UN Trade and Development agency.

But excluding a few exceptions, the report showed a far sharper decline of more than 10 percent in FDI for the second consecutive year, it cautioned.

UNCTAD said the prospects for FDI remained "challenging" in 2024, but highlighted some positive developments.

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."

Falling direct investment hurts developing countries in particular, because it tends to be their largest external source of financing.

Last year, FDI flows to developing countries fell by seven percent, to $867 billion, UNCTAD said, reflecting an eight-percent decrease to developing countries in Asia.

Flows to Africa meanwhile slumped three percent, to $53 billion.

But UNCTAD highlighted that the continent was attracting "a growing share of global mega projects, with six valued at more than $5 billion".

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".

As for foreign direct investment flows to developed countries, they were heavily impacted by the financial transactions of multinational enterprises, UNCTAD said.

This was "partly due to efforts to implement a global minimum tax rate on the profits of these corporations", it said.

Inflows to most parts of Europe and North America were down by 14 percent and five percent respectively, the report showed.

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