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January 23, 2016 | 14:20 | Dubai
Global FDI flows rose 36% in 2015 to reach an estimated $1.7 trillion, their highest level since 2007. A wave of cross-border mergers and acquisitions (M&As), which rose significantly in value, was largely responsible for the increase in FDI. Greenfield investment project announcements, in contrast, registered little change in value terms from 2014, with a rise in developed economies roughly compensating a pullback in MNEs’ capital expenditures in developing economies, the latest UNCTAD (United Nations Conference on Trade and Development) Global Investment Trends Monitor reports.
The sharp increase of FDI inflows in developed economies changed the pattern of FDI by economic grouping in their favour. They now account for more than half of global FDI inflows. However at the regional level, developing Asia remained the largest host region for FDI inflows, surpassing EU and North America. Developing economies continue to make up half of the top 10 host economies in the year.
The United States, with an estimated $384 billion in inflows, vaulted back into first position among host economies in 2015, after exceptionally falling to third in 2014. FDI inflows to Hong Kong, China – the second largest recipient in the world – reached a record of $163 billion for the first time ever. The rise in both economies, however, was due in part to inversion deals and reconfiguration of corporate structures involving large values in the financial account of the balance of payments but little movement in actual resources. However, UNCTAD said, barring another wave of M&A deals and corporate reconfigurations, FDI flows are expected to decline in 2016, reflecting the fragility of the global economy, volatility of global financial markets, weak aggregate demand and a significant deceleration in some large emerging market economies. Elevated geopolitical risks and regional tensions could further amplify these economic challenges.