GENEVA (Reuters) – Global foreign direct investment (FDI) fell by less than previously thought in 2016 and will rise this year and in 2018, although its flow will stay below the peak seen 10 years ago, the United Nations said on Wednesday.
FDI, which largely comprises cross-border mergers and acquisitions (M&A) and investment in start-up projects abroad, slipped by 2 percent in 2016, much less than the 13 percent fall suggested by preliminary figures in February.
FDI is a bellwether of globalization and a potential sign of the growth of corporate supply chains and future trade ties.
This year it is expected to grow thanks to higher economic growth expectations, a resumption of trade growth, and increasing corporate profits, the United Nations trade and development agency UNCTAD said.
“Policy uncertainty and geopolitical risks could hamper the recovery, and tax policy changes could significantly affect cross-border investment,” UNCTAD said in a report.
The outlook was cautiously optimistic for most regions, except for Latin America and the Caribbean, because of their uncertain macroeconomic and policy outlook, it said.
The United States remained the top FDI recipient in 2016, with inflows increasing 12 percent to $391 billion, followed by Britain, which was pushed up into second position by several mega-deals and welcomed $254 billion of FDI in total.
China was in third position but slipped 1 percent from 2016 to $134 billion.
FDI flows have repeatedly undershot forecasts because of the stuttering recovery after the global financial crisis. In 2007, FDI flows hit an estimated $1.9 trillion, the highest on record.
(Reporting by Tom Miles; Editing by Tom Heneghan)