Global investment flows down more than 10% in 2023 UNCTAD

21 Jun 2024

Global investment flows down more than 10% in 2023 UNCTAD

Global investment flows declined by 10 per cent in 2023, even as global foreign direct investment (FDI) decreased by 2 per cent to $1.3 trillion, according to the latest World Investment Report released by UN Trade and Development (UNCTAD) on 20 June.

The declining trend in foreign investments, for a second consecutive year, is driven by increasing trade and geopolitical tensions and a slowing global economy, says the report.

While the prospects for FDI remain bleak for 2024 as well, the report notes that a general easing of financial conditions augurs well for a shift towards national policies that facilitate foreign investment flows and international agreements that support foreign investments.

UNCTAD wants developing countries to use digitisation not just as a provider of technical solutions, but also as a wider tool for implementation of policies that help attract and retain financial flows.

Investment, according to UNCTAD secretary-general Rebeca Grynspan, is not just about capital flows - it encompasses human potential, creation of an enabling environment and a will to pursue a more equitable and sustainable world.

According to the report, investment flows to developing countries fell 7 per cent to $867 billion in 2023, with developing Asia accounting for 8 per cent decline in foreign investment.

FDI was down 3 per cent in Africa and down 1 per cent in Latin America and the Caribbean, it adds.

Investment flows to Europe and North America were down 14 per cent and 5 per cent, respectively. This, according to the UNCTAD report, was due mainly to the implementation of a global minimum tax rate that affected financial transactions of multinational companies.

In an update of its Trade and Development Report released in April, UNCTAD had  projected global economic growth at 2.6 per cent in 2024, barely above the 2.5 per cent level that is associated with recessionary conditions.

This rate of growth is also significantly lower compared to the pre-pandemic average of  3.2 per cent from 2015 to 2019.

The report says the increasing focus on inflation the world over overshadows other important issues like trade disruptions, climate change and rising inequalities.

UNCTAD has suggested a comprehensive strategy, involving structural changes  and coordinated global efforts to bolster both investment and supplies along with measures to boost demand to improve income and employment.

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