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UNCTAD sees possibility of modest growth in FDI this year

MODEST GROWTH in foreign direct investment (FDI) is possible this year on the back of increased greenfield project announcements, according to the United Nations Conference on Trade and Development (UNCTAD).

In its World Investment Report, UNCTAD said it remained positive for the full year despite weakness in global FDI for a second straight year.

Weak prospects for trade, geopolitical tensions, industrial policy, and supply chain diversification are reshaping FDI patterns and causing multinational enterprises to be cautious in investment, UNCTAD said.

“However, multinational profit levels remain high, financing conditions are easing and increased greenfield project announcements in 2023 will positively affect FDI,” it added.

Global FDI decreased 2% to $1.3 trillion, affected by wild swings in financial flows in a small number of European conduit economies.

“The decline for the second consecutive year is driven by increasing trade and geopolitical tensions in a slowing global economy. So this is a very challenging trend for the developing nations,” Rebecca Grynspan, secretary general of UNCTAD, said in a briefing on Thursday.

The report showed that FDI in developing countries declined 7% last year, led by an 8% decline in FDI in developing Asia.

According to UNCTAD, the decline in FDI in developing Asia was due to a rare decline in inflows into China and sizable declines in India and West and Central Asia.

“Only Southeast Asia held steady. Industrial investment in Asia remains buoyant, as shown by greenfield announcements, but the global downturn in project finance also affected the region,” it added.

Developing Asia saw a 25% decline in international project finance and a 22% increase in greenfield projects.

On prospects for 2024, Ms. Grynspan said: “We are optimistic about 2024. If there is an extra effort to ease the financial conditions and for investment facilitation, if we could have these two things combined, that will support our more optimistic view for 2024.”

“If we can support the efforts of countries on investment facilitation, maybe that can unblock obstacles that the developing countries, especially, are facing in terms of attracting FDI,” she added. — Justine Irish D. Tabile