Global FDI Trends in 2018
Foreign direct investment (FDI) experienced a decline in 2018, marking the third consecutive year of decrease. According to the UNCTAD World Investment Report 2019, global FDI flows fell by 13% to $1.3 trillion from $1.5 trillion the previous year. This contraction was primarily driven by the repatriation of earnings by US multinational enterprises (MNEs) following tax reforms introduced in 2017.
Top Recipients of FDI in 2018
Despite the overall decline, the United States remained the largest recipient of FDI in 2018, with inflows amounting to $311 billion. China also saw a significant increase in FDI, reaching a record high of $144 billion. Other major recipients of FDI included Hong Kong (China) and Singapore.
Outward FDI in 2018
In terms of outward FDI, Japan emerged as the largest investor in 2018, followed by China and France. The United States, which had previously been a major outward investor, dropped out of the top 20 list due to the repatriation of investment earnings by its MNEs.
FDI in Developing Countries
Developing countries managed to maintain a steady level of FDI inflows in 2018, with flows rising by 2%. This contributed to the share of global FDI flows going to developing countries increasing to 54%, up from 46% in 2017.
Underlying FDI Growth Trend
The underlying trend of FDI growth has been relatively weak since 2008, with an average growth rate of only 1% per year. This has been attributed to factors such as declining rates of return on FDI, the increasing use of asset-light forms of investment, and a less favorable investment policy climate.
Sources
- Countries With Most FDI In 2018 – Global Finance Magazine
- Direct Investment by Country and Industry: 2018
- Global foreign direct investment slides for third consecutive year | UNCTAD
FAQs
Which country received the highest FDI in 2018?
The United States received the highest FDI in 2018, amounting to $311 billion.
What was the total amount of FDI received by the top 10 countries in 2018?
The top 10 countries received a combined total of $1.02 trillion in FDI in 2018.
Which region received the most FDI in 2018?
Developing countries received more than half (54%) of global FDI flows in 2018.
What were the major factors that contributed to the decline in global FDI in 2018?
The decline in global FDI in 2018 was primarily driven by the repatriation of earnings by US multinational enterprises (MNEs) following tax reforms introduced in 2017.
What is the outlook for FDI in 2019?
FDI is expected to recover in developed economies in 2019 as the effect of the U.S. tax reforms winds down. However, the underlying FDI trend indicates that a rise in FDI may be relatively modest and may be further reined in by other factors, such as geopolitical risk, escalating trade tensions, and a global shift towards more protectionist policies.
What are the long-term trends in FDI?
The longer-term trend shows the growth of non-equity modes of international production outpacing FDI, as evidenced by the relative growth rates of royalties, licensing fees, and services trade.
What are the implications of the decline in FDI for developing countries?
The decline in FDI can have a significant impact on developing countries, as it can lead to reduced economic growth, job losses, and a decline in living standards.