Amidst trade and geopolitical tensions, global foreign direct investment (FDI) flows declined by 2% to $1.3 trillion in 2023, resulting in a decrease of 7% for FDI flows to developing countries. The report stated that if certain European conduit economies with significant fluctuations in investment flows were excluded, the overall figure would have dropped by over 10%. This decline was primarily due to tight financing conditions that led to a significant decrease in international project finance deals, which are crucial for infrastructure investment.
This poses a particular challenge for the poorest countries, making them more susceptible to the adverse effects of the global downturn in this type of investment. Crises, protectionist policies, and regional readjustments have disrupted the world economy, causing fragmentation in trade networks, regulatory frameworks, and global supply chains. This has resulted in increased uncertainty and volatility in global investment flows, creating both obstacles and limited opportunities.
Despite these challenges, the outlook for 2024 remains slightly optimistic with modest growth achievable for the year. This is supported by the easing of financial conditions and advancements in investment facilitation efforts at both national and international levels. Investments are increasingly being directed towards global value chain-intensive manufacturing sectors such as automotive and electronics in regions and countries that have convenient access to major markets. However, many developing countries continue to struggle in attracting foreign investment and participating in global production networks, leaving them on the sidelines in the global economic landscape.
In conclusion, while FDI flows declined significantly due to various factors such as trade tensions and geopolitical instability, there is still hope for modest growth next year with continued efforts towards improving financial conditions and increasing investment facilitation efforts at both national and international levels.
