STORY Aug 13, 2018

Globally, foreign direct investment decreased in 2016

Globally, foreign direct investment fell by 1 percent in 2016

Worldwide, inflows of foreign direct investment (FDI) saw a slight decrease of 1 percent in 2016. Global FDI inflows diverged among regions and income groups. FDI inflows to the middle-income economies fell by 11 percent which was partly offset by an increase of 5 percent into the high income and 2 percent into low income economies.

Three quarters of FDI went to high-income countries

In 2016, FDI flows into high-income economies came to $1.8 trillion - the highest level recorded since 2009. These inflows accounted for three fourths of the global total and were mainly driven by the increase in equity in the form of cross-border mergers and acquisitions (M&A).

Half of the FDI to high income countries, some $931 billion went to three countries: United States, United Kingdom and the Netherlands. Large M&As in the UK represented more than half of the foreign investments into the economy. FDI flows into the UK economy totaled $266 billion almost five times higher than 2015 figures and the highest since 2008.

FDI to low- and middle-income countries fell to a 7-year low

FDI flows into low and middle-income economies totaled 579 billion in 2016 - the lowest level recorded in the last seven years. This decline reflected persistent weak aggregate demand, sluggish growth in some commodity-exporting countries, and a slump in profits earned by multilateral enterprises.

China, Brazil, India, Mexico and Russia received about two thirds of net FDI inflows to low- and middle-income countries in 2016. FDI inflows to China fell 28 percent to $175 billion but the country remained the single largest recipient of FDI inflows among low- and middle-income countries, accounting for 30 percent of the group’s total. FDI inflows to Russia soared more than 300 percent to $33 billion, largely because of the privatization of state-owned assets.