Investment and the Digital Economy
Following a surge in foreign investment in 2015, global FDI flows fell 2 per cent, to $1.75 trillion, amid weak economic growth. A fall in inflows to developing economies was partly offset by modest growth in developed countries and a sizeable increase in transition economies. As a result, developed economies accounted for a growing share of global FDI inflows in 2016, absorbing 59 per cent of the total.
A modest recovery in global FDI flows is forecast for 2017, although flows are expected to remain well below their peak of 2007. A combined upturn of economic growth in major regions and improved corporate profits will boost business confidence, and consequently MNEs’ appetite to invest.
A cyclical uptick in manufacturing and trade is expected to result in faster growth in developed countries, while a likely strengthening of commodity prices should underpin a recovery in developing economies in 2017. As a result, global FDI flows are expected to increase by about 5 per cent in 2017 to almost $1.8 trillion. However, elevated geopolitical risks and policy uncertainty for investors could have an impact on the scale and contours of the FDI recovery in 2017.