The volume of foreign direct investment in the world in 2023 increased by 3%, to $1.37 trillion

The volume of foreign direct investment (FDI) in the world in 2023 increased by 3%, to $1.37 trillion, follows from the report of the United Nations Conference on Trade and Development (UNCTAD). This slight increase in FDI volumes, however, was largely due to the “settling” of investments in transit countries – a significant flow was withdrawn to the euro area countries, mainly to Luxembourg and the Netherlands, due to high interest rates. As UNCTAD explains, without taking these countries into account, there would have been a decrease in FDI volume, not growth, both in the world as a whole (a decrease of 18% instead of an increase of 3%) and in developed countries (minus 28% instead of +29%) . FDI inflows to developing countries, according to UNCTAD estimates, in 2023 decreased by 9%, to $841 billion: the volume of investments in Asia decreased by 12%, to $584 billion, in Africa – by 1%, to $48 billion.

Apparently, the decline in FDI inflows to China may be sensitive: their volume decreased by 6%, to $157.1 billion (according to the calculations of the Ministry of Commerce of the People’s Republic of China – by 8%). It should be noted that in 2022, the volume of FDI in China increased by 5%, to $189 billion. At that time, it was assumed that economic growth would be largely ensured by the support of investment activity – for this, China significantly reduced the so-called lists of exceptions – industries inaccessible to foreign capital. The World Bank estimates that while investment into the country is likely to increase in the coming years, the growth will not be as strong as the country’s authorities expected a year ago. In particular, the number of international project finance transactions in the renewable energy sector decreased last year for the first time since the signing of the Paris Agreement in 2015. In 2023, there were 17% fewer such projects than in 2022, which somewhat increases the risks of not achieving global climate goals (for more details, see Kommersant on January 23).

UNCTAD forecasts that 2024 will also see a slight increase in FDI flows. Investment growth will continue to be constrained by geopolitical risks and further fragmentation of the global economy. Let us remind you that in 2020, due to COVID-19, the figure decreased by 36%, in 2021, against the backdrop of the global economic recovery, it increased by 64%, and in 2022 it decreased again – by 12%, to $1.3 trillion due to for the consequences of the Russian military operation in Ukraine, including rising food and energy prices.

Kristina Borovikova