Roundup: Global FDI inflows decline in 2014: UNCTAD

Global foreign direct investment (FDI) inflows in 2014 slid by 8 percent to an estimated 1.26 trillion dollars, said the United Nations Conference on Trade and Development (UNCTAD) in its latest report on Thursday.

Factors behind the decline included the fragility of the global economy, policy uncertainty, and geopolitical risks, according to the latest edition of the UN organization's regular report Global Investment Trends Monitor.

With its 2014 FDI inflows estimated at 128 billion dollars - some 3 percent up from the previous year - Chinese mainland overtook the United States to become the largest FDI recipient in the world in 2014, UNCTAD's James Zhan told a press conference.

Zhan explained to Xinhua that it was mainly due to a growth of inflows in the service sector, and as well as a drop in investment flows to the United States, which fell to third place in 2014.

The UNCTAD report showed that FDI flows to developed economies as a whole dropped by 14 percent in 2014 to an estimated 511 billion dollars, with FDI inflows to the United States falling to an estimated 86 billion dollars, while those to the European Union rose by 13 percent to an estimated 267 billion dollars.

Developing economies saw a brighter outcome in terms of capital inflows last year, reaching a record high of over 700 billion dollars which accounted for 56 percent of global FDI flows, the report noted, adding that the expansion was mainly driven by developing Asian markets, the world's largest FDI recipient region.

By contrast, transition economies experienced a decline of 51 percent in their FDI inflows, reaching an estimated 45 billion dollars as a result of regional conflicts and sanctions imposed on Russia.

FDI flows to Russia were estimated to have fallen by 70 percent to an estimated 19 billion dollars, due to both the country's negative growth prospects and the withheld equity investments from major oil and gas companies based in developed economies, said the report.

It also noted that as for Ukraine, which was bogged down by ongoing violence, FDI inflows to that country turned negative to -0.2 billion dollars.

Moreover, cross-border mergers and acquisitions rebounded strongly in 2014, reaching their highest level since 2011 with an increase of 19 percent to 384 billion dollars. Strong performances were seen in finance, pharmaceutical, metal, and communications and media industries, said the report.

As for the outlook of a solid FDI rise for the year ahead, UNCTAD saw the road still bumpy and uncertain.

UNCTAD warned that a sluggish global economy, coupled with growth tempered by hesitant consumer demand, volatility in currency markets, and geopolitical instability hindered the investment pace.

From a regional perspective, the UN organization pointed out that the increasing divergence in economic growth between the United States, the eurozone and Japan would lead to different patterns of FDI, while in developing and transition economies, slower growth prospects in some emerging markets and regional conflicts were likely to affect investment negatively.

In spite of those risks, the report also shed light on the positive factors, saying that transnational corporations were expected to gradually increase strategic investments and to deploy part of their record level cash holdings.

Moreover, stronger economic growth in the United States, the demand-boosting effect of lower oil prices, and proactive monetary policy in the eurozone could support increased FDI flows. Endit