Trends: how the flows of foreign direct investment in the world were distributed in 2019
"Trends" - a new cycle of materials on the website of FEZ Grodnoinvest. In this column, we will talk about key world and regional events in economic, investment and business sectors based on our own analysis and data from leading specialized institutions. The first material on foreign direct investment (FDI) flows in 2019. It is based on the latest report of the United Nations Conference on Trade and Development (UNCTAD) and analyzes the overall dynamics of investment activity in the world.
In 2019, foreign direct investment (FDI) in the world reduced by 1% to $ 1.39 trillion due to a slowdown in macroeconomic indicators and high political risks for investors, including trade wars. FDI in developed countries reduced by 6% over the year to a historic minimum of $ 643 billion. FDI in the European Union countries showed even greater decline - by 15% to $ 305 billion, while investment flows in the United States remained unchanged at $ 251 billion.
In 2019, the volume of FDI in emerging economies remained unchanged at $ 695 billion, while Latin America and the Caribbean attracted 16% more of FDI, and African countries - 3%. FDI in Asia reduced by 6% over the past year, but this region still forms one third of all global FDI.
As for the dynamics of attracting FDI to countries with economies in transition, which includes Belarus, there is a significant increase in the results of 2019 - by 65%. At the same time, this group of countries forms only 4% of the total flow of FDI in the world, or $ 57 billion.
According to the results of the past year, the experts of the UN Conference on Trade and Development (UNCTAD) made a number of important trend comments:
- in the UK, FDI reduced by 6% due to events around Brexit;
- FDI in Singapore grew by 42% due to the positive development of the region and trust from international investors;
- over the past year, the volume of attracted FDI in China and the USA remained unchanged;
- FDI inflows to Brazil grew by 26% due to a new privatization program;
- FDI inflows to Germany have tripled due to loans from multinational companies that have branches and representative offices in this country.
In 2020, UNCTAD economists expect a slight increase in global FDI flows amid modest growth in global GDP. Positive growth in FDI will be affected by the high corporate profits of international companies and the reduction of tension around key trade wars. At the same time, experts are worried that in 2019 the number of new Greenfield projects that were announced to be implemented was reduced by 22%. This can significantly affect global investment and increase the risks of protectionist policies in a number of large economic associations and countries.
The key countries for attracting FDI are the United States (18% of world flows), China (10%) and Singapore (8%). The top 10 also includes Brazil, the United Kingdom, Hong Kong, France, India, Canada and Germany. At the same time, the highest growth in 2019 was demonstrated by Germany (+ 232%), Singapore (+ 42%) and France (+ 40%). The largest decline in FDI inflows from the top 10 countries was recorded in Hong Kong (-48%).
In 2019, after two years of stagnation, FDI inflows to countries with economies in transition began to increase. In 2019, FDI amounted to $ 57 billion with a growth rate of 65%. The Russian Federation has become a key recipient of global foreign investment in the region, with FDI volumes doubling to $ 33 billion. FDI inflows to the CIS countries and Georgia, including due to Russia, grew by 82% to $ 49 billion.
The drivers of FDI growth in countries with economies in transition are equity investments and reinvestment. This indicates an increase in investor trust and the expectation of higher economic growth in the region. However, the prospects for 2020 remain illusory. The reason for this is the reduction in 2019 of the number of mergers and acquisitions (M&A) and announcements of new greenfield projects.
In FEZ Grodnoinvest all the necessary conditions have been created for establishment of efficient production and successful business development. For this, potential investors are offered available land plots and production space in 8 cities and regions of Grodno region on industrial sites with the necessary engineering and transport infrastructure; customs, tax and other preferences are provided.
In 2019, 4 companies in the woodworking sphere and production of non-metallic mineral products with a total declared investment of over $190 million, including fixed assets of over $160 million, became residents.
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