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UNCTAD released Global Investment Trends in 2014 and Prospects for 2015

Feb 4, 2015 10:10 IST

The United Nations Conference on Trade and Development (UNCTAD) on 29 January 2015 released a report on Global Investment Trends in 2014 and Prospects for 2015.

As per the report, in 2014, global Foreign Direct Investment (FDI) inflows declined by 8 percent to an estimated 1.26 trillion US dollars due to fragility of the global economy, policy uncertainty and geopolitical risks.

China became the world's top destination for foreign direct investment in 2014, edging the US out of the top position for the first time since 2003. US  was on top as foreign investment destination for past 11 years.

A large divestment in the United States reduced the global level of FDI flows.

Highlights of the report
• FDI flows to developed countries dropped by 14 percent to an estimated 511 billion US dollars, significantly affected by a large divestment in the United States.
• FDI flows to the European Union (EU) reached an estimated 267 billion US dollars, this represents a 13 percent increase since 2013.
• Flows to transition economies reduced to 45 billion US dollars as regional conflict, sanctions on the Russian Federation, and negative growth prospects deterred foreign investors from investing in the region.
• Developing economies saw their FDI inflows reach a new high of more than 700 billion US dollars, 4 percent higher than 2013 with a global share of 56 percent.
• In 2014, China with an increase of 3 percent became the world's largest recipient of FDI of 53.5 billion US dollars, compared with 52.7 billion in 2002. Among the top five FDI recipients in the world, four are developing economies.
• FDI in the United States, traditionally the largest recipient of such money, plunged by 53 percent last year to reach US$30 billion, the lowest level in 12 year.
• Cross-border mergers and acquisitions rose by 19 percent, driven mainly by restructuring deals. Announced greenfield investment projects rose by 3 percent in 2014.
• Flows to south-east Asia rose 27 percent to 19 billion US dollars, while the south merely received  6 billion US dollars in FDI.
• Asia led the way with a 15 percent rise in FDI to an all-time high of 492 billion US dollars. By contrast, FDI in Latin America fell 19 percent to 153 billion US dollars after four years of increase and FDI in Africa fell 3 percent to 55 billion US dollars.

Top 10 foreign investment destinations in 2014

Rank

Country

FDI ( Billion US dollars)

1

China

128

2

Hong Kong

111

3

United States

86

4

Singapore

81

5

Brazil

62

6

United Kingdom

61

7

Canada

53

8

Australia

49

9

Netherlands

42

10

Luxembourg

36

Prospects for 2015
• Trends in global FDI flows are uncertain for 2015. The fragility of the world economy with growth tempered by hesitant consumer demand, volatility in currency markets and geopolitical instability will act as a deterrent for investors.
• The decline in commodity prices will also lower investments in the oil and gas and other commodity industries.
• Among developed countries, the increasing divergence in economic growth between the United States and the euro area and Japan will lead to different patterns of FDI.
• In developing and transition economies, slower growth prospects in some emerging markets and regional conflicts are likely to affect investment negatively.
• Stronger economic growth in the United States, the demand boosting effect of lower oil prices and proactive monetary policy in the Eurozone can support increased FDI flows.
• Increased investment liberalization and promotion measures will also favourably affect FDI flows.

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