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Africa’s investment flow takes a -5% dip

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Africa’s investment flow takes a -5% dip

The world’s foreign direct investment (FDI) took a significant decline of 13 percent last year, recording an estimated $1.52 trillion, as global economic growth remained weak and world trade volumes posted anaemic gains, says the Global Trends Investment Monitor released Wednesday.

The report says that the fall reflects a heterogeneous impact of the current economic environment on countries worldwide as it was not shared equally across regions.

FDI flows to Africa also registered a -5 percent decline to close the year at $51 billion. Mozambique saw its FDI fall 11 percent, but the level was still significant at an estimated $3 billion. South Africa saw a 38 percent increase in FDI inflows, though they remained at a relatively low level of $2.4 billion.

The report says that equity investments at the global level were boosted by a 13 percent increase in the value of cross-border mergers and acquisitions, which rose to their highest level since 2007, reaching $831 billion. “The value of greenfield projects announcements reached an estimated $810 billion – a 5% rise from the previous year, although this was largely due to a number of very large projects announced in a handful of countries”, says the report.

It was noted in the report that slowing economic growth and falling commodities prices weighed on FDI flows to developing economies with inflows to these economies falling to an estimated $600 billion, due to significant decreases in Developing Asia and in Latin America and the Caribbean. “Nevertheless, developing economies continue to comprise half of the top 10 host economies. There was a widespread downturn in cross-border mergers and acquisitions activity across developing sub-regions during the year, which fell 44% in terms of value”, says the report.

Looking ahead, the report says economic fundamentals are supportive of a potential rebound in FDI flows in 2017. Global economic growth is projected to accelerate in the coming year, reaching 3.4 percent compared to the post-crisis low of 3.1 percent in 2016. Growth in developed countries is expected to improve, including in the United States through fiscal stimulus.

“Emerging and developing economies are also forecast to rebound significantly in 2017, led by a sharp rise in growth in natural resources exporting countries as commodities prices are expected to increase, especially for crude oil”, the report says. Greater economic activity will help boost world trade volumes, which are forecast to expand by 3.8 percent in 2017 compared to just 2.3 percent in 2016. UNCTAD projects that global FDI flows will increase by around 10% over the year.

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