23/05/2023

The Global Investment Trends Monitor is a quarterly publication produced by UNCTAD.

The new UNCTAD publication “Global Investment Trends Monitor” published in January 2023 provides an overview of global foreign direct investment (FDI) in 2022 and forecasts their prospects for 2023.

The main idea that emerges from the report is that the global dynamics of global FDI weakened in 2022 with a downward trend for all projects after the first quarter of the current year. Decrease also expected for 2023.

The multitude of crises on the world stage, in this case the war in Ukraine, the surge in food and energy prices, financial turbulence and debt pressures, have inevitably affected global foreign direct investment (FDI) in 2022.

As a result, the pace of the number of new investment projects, including announcements of new locations, financing of international projects and cross-border mergers and acquisitions, reversed after the first quarter of 2022.

Indeed, project financing and mergers and acquisitions have been particularly affected by the deterioration of financing conditions, rising interest rates and increasing uncertainty on the financial markets. Cross-border mergers and acquisitions decreased by 6% globally and by more than 50% in the United States, the largest M&A market. The value of international project financing fell by more than 30% in 2022.

Preliminary data on the announcements of new projects in 2022 still indicate a growth of 6%, thanks to the continuation of momentum in the first half of the year.

The values increased significantly (+54%) due to several megaprojects and the transition from project financing to corporate financing in the renewable energy sector, which led to an increase in the average size of the projects.

Investment trends in selected economies in 2022

• In the United States, the value of mergers and acquisitions, which normally represent a significant share of FDI flows, fell by 53%.

• In Europe, announcements of new projects decreased by 15%, with decreases in most major economies, with the exception of Italy (+11%).

• China recorded a 31% decrease in the number of new project announcements although the number of international project financings increased by 11%.

• India, for its part, was the rare exception to the general trend of gloom, with a doubling of new project announcements and a 34% increase in international project financing.

• The ASEAN economies (Association of Southeast Asian Nations) recorded a sharp decline in cross-border sales of mergers and acquisitions (-74%), which could translate into a decrease in the value of FDI for all these countries for 2022. However, announcements of new projects remained strong (+21%).

• In Brazil, the number of announcements of new projects increased by about a third, but international project financing operations decreased by 17%.

While the high number of entirely new megaprojects in renewable energies remains encouraging, the financing of international projects in the sector remains overdue Indeed, the number of projects in renewable energies has decreased by 5% and by almost 40% in value.

As a result, the overall international investment positively impacting climate change has decreased by more than 9% in terms of announced values and by 6% in the number of projects (Figure 2).

On the other hand, several major projects in the extractive industry (industries, coal, oil and gas) have been announced despite the context of the global energy crisis.

The prospects for global FDI in 2023

The prospects for international FDI in 2023 seem weak.

A large number of economies in the world are expected to enter recession and several factors may be the origin :

• negative or slow growth in many economies,

• further deterioration of financing conditions,

• investor uncertainty in the face of multiple crises and, in particular in developing countries,

• increasing risks related to the financial crisis associated with debt levels,