the volume of foreign direct investment in the world in 2022 decreased by 12%
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After a sharp decline due to the COVID-19 pandemic in 2020 (by 36%) and a rapid recovery in 2021, the volume of foreign direct investment (FDI) in the world in 2022 fell again – by 12%, to $ 1.3 trillion, follows from the report of the United Nations Conference on Trade and Development (UNCTAD). Among the main reasons is the Russian military operation in Ukraine and its consequences, including rising food and energy prices. By the end of the year, prices fell, but the military conflict continues, and therefore the risks for doing international business remain, UNCTAD notes. Given the general uncertainty, analysts predict that the downward trend in FDI will continue in 2023.
In 2022, the volume of foreign investment in developed countries fell especially noticeably — by 37%, to $378 billion (see chart). The number of new investment projects and project financing transactions (investments in infrastructure) over the past year has increased slightly – by 4% and 10%, respectively. The number of cross-border mergers and acquisitions decreased by 12% – as a rule, UNCTAD reminds, a significant share of the inflow of foreign investment falls on them. For example, in the United States, due to rising interest rates and a slowdown in the economy, such transactions were halved in 2022, and FDI inflows into the country decreased by 26%, to $285 billion.
The flow of foreign investment in developing countries over the past year increased by 4%, to a record $916 billion. At the same time, most of it fell on a limited number of large economies. Most notably, foreign investment in 2022 increased in India — by 10%, to $49 billion (due to project financing transactions, in particular, the construction of a large chip manufacturing plant in the country) and in China — by 5%, to $189 billion. PRC authorities they expect to support economic growth, including by supporting investment activity: the growth in FDI over the past year is explained by a significant reduction in the so-called lists of exceptions – industries inaccessible to foreign capital (for more details, see Kommersant on March 6).
The inflow of FDI in the Russian Federation due to the departure of large companies was replaced by an outflow – from $39 billion in 2021 to minus $19 billion in 2022. At the same time, FDI in Ukraine fell from $7 billion to $1 billion over the past year due to the ongoing military conflict.
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