UNCTAD Report Highlights Challenges and Regional Variances

A recent report from the United Nations Conference on Trade and Development (UNCTAD) reveals a decline in Foreign Direct Investment (FDI) flows to developing countries, particularly the Global South, amounting to $841 billion in 2023. This drop of 9% is attributed to a global environment of weak investment and economic uncertainty.

While FDI flows to Asia experienced a 12% decrease, Africa and Latin America and the Caribbean saw relatively stable figures. The overall global increase in FDI by 3% to an estimated $1.37 trillion in 2023 was primarily influenced by higher values in certain European economies acting as conduits. However, excluding these economies revealed an 18% decline in global FDI flows.

Developing Asia, particularly major economies such as China and India, faced declines in FDI inflows. China reported a rare 6% decrease, but greenfield project announcements witnessed an 8% growth. Similarly, India experienced a 47% drop in FDI inflows but remained among the top five global destinations for greenfield projects.

In the ASEAN region, usually a hub for FDI growth, a 16% decline was observed, yet greenfield project announcements surged by 37%, showcasing continued attractiveness for manufacturing investments.

West Asia maintained stable FDI at 2%, with the United Arab Emirates and Saudi Arabia standing out as significant recipients of greenfield investments.

Africa’s FDI flows remained nearly unchanged at $48 billion, with a 1% decrease compared to the previous year. While greenfield project announcements increased, a notable one-third reduction in project finance deals raised concerns for infrastructure financing.

In Latin America, Brazil recorded a 22% decrease in FDI inflows, contrasting with Mexico’s 21% increase in both FDI and greenfield project announcements.

Looking ahead, the UNCTAD report suggests cautious optimism for a modest increase in FDI flows in 2024. However, it highlights potential risks such as geopolitical tensions, high debt levels in various countries, and the threat of further global economic segmentation, which could impact the global investment landscape.