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The Global Investment Trend Monitor report compiled by United Nations Conference on Trade and Development (UNCTAD) states that the global foreign direct investment remained flat in 2019 at USD 1.39 trillion, a 1 per cent decline from a revised USD 1.41 trillion in 2018.
This is against the backdrop of weaker macroeconomic performance and policy uncertainty for investors, including trade tensions, it said.
Developing economies continue to absorb more than half of global FDI flows. South Asia recorded a 10 per cent increase in FDI to USD 60 billion and “this growth was driven by India, with a 16 per cent increase in inflows to an estimated USD 49 billion. The majority went into services industries, including information technology,” the report said.
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The FDI flows to developed countries remained at a historically low level, decreasing by a further 6 per cent to an estimated USD 643 billion.
The FDI to the European Union (EU) fell by 15 per cent to USD 305 billion, while there was zero-growth of flows to the United States, which received USD 251 billion FDI in 2019, as compared to USD 254 billion in 2018, the report said.
Despite this, the United States remained the largest recipient of FDI, followed by China with flows of USD 140 billion and Singapore with USD 110 billion.
China also saw zero-growth in FDI inflows. Its FDI inflows in 2018 were USD 139 billion and stood at USD 140 billion in 2019. The FDI in the UK was down 6 per cent as Brexit unfolded.
The report added that cross-border M&As decreased by 40 per cent in 2019 to USD 490 billion the lowest level since 2014.
Slowed down by sluggish Eurozone growth and Brexit, European M&A sales halved to USD 190 billion. Deals targeting United States companies remained significant accounting for 31 per cent of total M&As.
The fall in global cross-border M&As sales was deepest in the services sector (a 56 per cent decline to USD 207 billion), followed by manufacturing (a 19 per cent decline to USD 249 billion) and the primary sector (14 per cent decline to USD 34 billion), the report said.
In particular, sales of assets related to financial and insurance activities and chemicals fell sharply. The decline in M&A values was driven also by a lower number of megadeals. In 2019, there were 30 megadeals above USD 5 billion compared to 39 in 2018, it said.
Looking ahead, UNCTAD expects the FDI flows to rise moderately in 2020, as current projections show the global economy to improve somewhat from its weakest performance since the global financial crisis in 2009.
Corporate profits are expected to remain high and signs of waning trade tensions emerge. However, the decrease of announced greenfield projects by 22 per cent an indicator of future trends, high geopolitical risks and concerns about a further shift towards protectionist policies temper expectations.
The report said that GDP growth, gross fixed capital formation and trade are projected to rise, both at the global level and, especially, in several large emerging markets.
Such an improvement in macroeconomic conditions could prompt MNEs to resume investments in productive assets, given also their easy access to cheap money, the fact that corporate profits are expected to remain solid in 2020, and hopes for waning trade tensions between the United States and China, it said.
However, significant risks persist, including high debt accumulation among emerging and developing economies, geopolitical risks and concerns about a further shift towards protectionist policies, it added.