FDI 2023 : global growth, sectoral concerns, and persistent challenges
Global Foreign Direct Investment (FDI) exceeded expectations in 2023, recording a 3% increase to reach an estimated total of $1.37 trillion, according to the latest Global Investment Trends Monitor by UNCTAD published on January 17. However, this growth was mainly concentrated in a few so-called "intermediate" European economies, such as Luxembourg and the Netherlands, often serving as transit points for FDI destined for other countries.
By the editorial staff
Excluding these intermediate economies, global FDI flows experienced a significant decline of 18% in 2023. The European Union saw a decrease of 23%, while the United States, the world’s top FDI recipient, experienced a 3% decline. The report also highlights a growing concern about the decline in announcements of international investment projects, especially in project financing (-21%) and mergers and acquisitions (-16%). Although the announcements of new projects decreased by 6% in number, they increased by 6% in value, primarily supported by the manufacturing industry.
Regarding the future, the report suggests a possible modest increase in FDI flows in 2024, attributed to the stabilization of inflation and borrowing costs in major markets. Nevertheless, it warns against persistent risks such as geopolitical tensions, increasing debt in many countries, and fears of a new fragmentation of the global economy.
In the context of developing countries, the overall landscape of FDI in 2023 revealed a 9% decline, totaling $841 billion. Developing Asian countries were particularly affected, with a 12% decrease. Although China experienced an unusual 6% decline in FDI inflows, it showed an 8% growth in announcements of new projects. India saw a significant 47% decrease in FDI inflows but remained among the top five global destinations for new projects. ASEAN recorded a 16% decline, but some countries in the region, such as Vietnam, Thailand, and Indonesia, saw a notable 37% increase in announcements of new projects in the manufacturing industry.
The sectoral analysis of the report for 2023 indicates an increase in projects in sectors heavily dependent on global value chains, such as automotive, textiles, machinery, and electronics. However, the semiconductor sector recorded a 10% decrease in the number of new projects and a 39% drop in their value. The renewable energy sector experienced its first decline since the Paris Agreement in 2015, with a 17% decrease in international project financing transactions and a 10% decrease in their value.
Regarding investment in sustainable development, the number of announced projects in developing countries related to the Sustainable Development Goals (SDGs) remained relatively stable in 2023. However, international project financing operations related to the SDGs decreased by 27% in number and 40% in value. In contrast, new projects aligned with the SDGs recorded a growth of 12% in number and 6% in value, with the food and agriculture sector showing marginal growth, while most other sectors experienced declines.
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