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In 2023, according to UNCTAD’s latest Global Investment Trends Monitor, FDI flows to developing countries witnessed a decline of 9%, dropping to $841 billion.

The decline hit developing countries in Asia the hardest, experiencing a 12% drop. Meanwhile, flows to Africa, Latin America, and the Caribbean remained relatively stable.

This decrease in FDI to developing regions in 2023 happened within a global context of weak investment and economic uncertainty.

Despite earlier expectations, global FDI flows managed a marginal 3% growth in 2023. As the report states, they reached an estimated $1.37 trillion, primarily due to higher values in a few European ‘conduit’ economies.

Notably, excluding these conduit economies, global FDI flows exhibited a steep 18% decline in 2023. Major developing economies in Asia experienced significant declines in FDI inflows in 2023. However, they remained appealing for greenfield projects, where parent companies establish ventures in foreign countries by building new operational facilities.

China witnessed a rare 6% decrease in FDI inflows but saw an 8% growth in new greenfield project announcements.

Similarly, India experienced a 47% drop in FDI inflows but remained among the top five global destinations for greenfield projects.

FDI flows to members of ASEAN declined by 16% in 2023. Yet, the group remained attractive for manufacturing investments. There was a remarkable 37% increase in greenfield project announcements in nations like Vietnam, Thailand, Indonesia, Malaysia, the Philippines, and Cambodia.

In West Asia, FDI remained stable at 2%, supported by sustained investments in the UAE, witnessing a 28% rise in greenfield announcements. They ranked second only to the United States, the world’s largest FDI recipient. Greenfield numbers also surged by 63% in Saudi Arabia. Africa’s FDI flows remained nearly unchanged in 2023, around $48 billion, marking a 1% decrease compared to the previous year.

The region observed an increase in greenfield project announcements, particularly in Morocco, Kenya, and Nigeria. However, a significant one-third reduction in project finance deals, higher than the global average, raises concerns for future infrastructure financing on the continent. In Latin America, the investment landscape in 2023 displayed contrasting trends.

Brazil, its largest economy, recorded a 22% decrease in FDI inflows. While the country’s greenfield project numbers remained stable, international project finance deals dropped by 40% compared to 2022.

Conversely, Mexico, the region’s second-largest economy, experienced a 21% increase in both FDI and greenfield project announcements. This reinforced its position as a top global recipient. Looking ahead, the UNCTAD report suggests that 2024 might witness a modest increase in FDI flows.

The report notes that forecasts regarding inflation and borrowing expenses in key markets suggest a stabilization of financial conditions for international investment agreements. However, it warns of significant risks, including geopolitical tensions, high debt levels in numerous countries, and the threat of further global economic segmentation, all of which cast a shadow over the global investment landscape.

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