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Friday, October 7, 2016, 09:55

Global FDI to fall up to 15% in '16: UNCTAD

By Xinhua

GENEVA - Global Foreign Direct Investment (FDI) flows are expected to drop to between US$1.5 and US$1.6 trillion in 2016, the United Nations Conference on Trade and Development(UNCTAD) said in a report on Thursday.

According to estimates from UNCTAD's latest Global Investment Trends Monitor, the 2016 figure registers a fall of 10 to 15 percent from 2015. Meanwhile, the UNCTAD predicts global FDI will recover in 2017 and 2018,

"This drop in FDI is troubling, because our global economy urgently needs investment to get it going again," said UNCTAD Secretary-General Mukhisa Kituyi.

The report explained that declining FDI reflects the fragility of the global economy, the persistent weakness of aggregate demand,  sluggish growth in some commodity exporting countries, and a slump in the profits of some multinational enterprises in 2015.

In the meantime, the road to the recovery of global FDI looks rocky, noted Kituyi.

"We forecast FDI to pick up in 2017, then to reach US$1.8 trillion in 2018, but it will remain lower than the pre-crisis peak," he said.

One striking aspect of the analysis is the diversity between the different regions. In Africa, FDI inflows are likely to return to growth in 2016. And after steep falls for the past three years, FDI flows into transition economies are expected to increase modestly too. But in developing Asia and in Latin America and the Caribbean, FDI is expected to decline. In developed economies, FDI grew sharply in 2015, but this growth is not expected to last in 2016.

This diversity holds true for mega-groupings too. For G20 countries, UNCTAD forecasts a fall in FDI flows of between 5 and 10 percent in 2016. APEC members are also expected to see FDI fall by 15 to 20 percent. However, BRICS countries could see FDI return to growth, increasing some 10 percent.

FDI flows have been volatile in recent years, with analysts warning that this uncertainty will have its own negative impact on trade and global value chains.

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