Fragile Global Economy Reduces Foreign Investments by 10 to 15 Percent

Direct foreign investments are expected to decrease by 10 to 15 percent globally this year due to the fragile global economy, weak demand, and declining profits of certain multinational companies last year, reported the United Nations agency UNCTAD on Thursday. The value of direct foreign investments worldwide is expected to slide to between 1.5 trillion and 1.6 trillion dollars this year, according to UNCTAD’s latest quarterly report on global investment trends.

– The decline in direct foreign investments reflects the fragility of the global economy, the persistent weakness of aggregate demand, anemic growth in certain commodity-exporting countries, and a significant drop in profits of some multinational companies in 2015, the report states.

Attention is drawn to the differences among various regions, with Africa expected to record a resurgence in direct foreign investments this year. After a sharp decline over the past three years, a moderate recovery is also anticipated in the group of transition economies, ranging from six to 34 percent, to 37 to 47 billion dollars. In developed economies, direct foreign investments sharply increased last year, while a decline of 10 to 14 percent is expected this year, to between 830 and 870 billion dollars.

There are significant differences among various groups of countries, with direct foreign investments in the group of the 20 largest developed and developing economies (G20) expected to decrease by five to 10 percent this year, according to UNCTAD forecasts. APEC (Asia-Pacific Economic Cooperation) member countries are expected to see an even larger decline in investments, by 15 to 20 percent.

In contrast, in the group comprising Brazil, Russia, China, India, and South Africa, direct foreign investments are expected to rise again, by 10 percent, according to UNCTAD estimates. New data confirms the forecasts made in June, the agency notes.

For the next two years, a recovery in direct foreign investments is anticipated.

– We forecast that direct foreign investments will recover in 2017 and then reach 1.8 trillion dollars in 2018, but will still remain below the peak levels of the pre-crisis period, emphasized UNCTAD Secretary-General Mukhisa Kituyi.

Short-term expectations for direct foreign investments are, however, slightly pessimistic, UNCTAD notes, adding that a decline is expected in both developed and developing countries.