February 25, 2024
Foreign Direct Investment

This picture taken from the sea of Dubai on March 3, 2021 shows the skyline of the Gulf emirate with Burj Khalifa in the centre. (Photo by GIUSEPPE CACACE / AFP) (Photo by GIUSEPPE CACACE/AFP via Getty Images)

Dubai, January 18, 2024 – The United Nations Conference on Trade and Development (Unctad) recently disclosed that the United Arab Emirates (UAE) has achieved a remarkable feat in Foreign Direct Investment (FDI) greenfield announcements, securing the second-highest position worldwide, trailing only the United States.

Stellar Growth in UAE’s FDI Greenfield Announcements

Unctad’s Investment Trends Monitor for January revealed a notable surge of 28% in FDI greenfield announcements in the UAE. This impressive growth stands out amidst a broader trend of stability in Foreign Direct Investment in West Asia, with an overall 2% increase. Additionally, Saudi Arabia witnessed a substantial 63% jump in greenfield numbers, as detailed in the same report.

Record-Breaking FDI Flow into the UAE: Foreign Direct Investment

The report highlighted that FDI flow into the UAE reached an unprecedented $22.73 billion in 2022, marking a substantial 10% growth compared to the previous year’s $20.66 billion.

Global FDI Trends in 2023

Globally, FDI flows in 2023 were estimated at $1.37 trillion, reflecting a modest 3% increase over 2022. Despite initial recession fears that subsided as the year progressed, economic uncertainty and higher interest rates impacted global investment. Excluding higher values in a few European conduit economies, the report noted that global FDI flows were actually 18% lower.

Shifting Dynamics in Developed Regions

Developed countries, particularly the European Union, witnessed a notable shift, with FDI turning positive at $141 billion compared to a negative $150 billion in 2022. However, excluding Luxembourg and the Netherlands, inflows to the rest of the EU were down by 23%. In other developed regions, FDI flows stagnated, showing zero growth in North America and declines elsewhere.

Challenges and Opportunities in Developing Countries

Developing countries experienced a 9% decrease in FDI flows, amounting to $841 billion. Developing Asia and Africa reported declines of 12% and 1%, respectively, while Latin America and the Caribbean remained stable, thanks to Central America’s resilience.

International Investment Projects: Signs of Recovery

The report delved into international investment project announcements, including greenfield, project finance, and cross-border mergers and acquisitions. Despite overall negative trends, greenfield project announcements showed a 6% increase in value, signaling a potential recovery.

Outlook for 2024

Unctad cautiously anticipates a modest increase in FDI flows in 2024, as projections for inflation and borrowing costs suggest a stabilization of financing conditions. However, the report underscores significant risks, including geopolitical uncertainties, high levels of global debt, and concerns about further economic fragmentation on a global scale.

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