Global FDI downshifts in Q2 2022
Project announcements indicate slowdown in new investments
- Global FDI flows in the second quarter of 2022 reached an estimated $357 billion, down 31% from the first quarter and 7% less than the quarterly average of 2021, reflecting a shift in investor sentiment due to the multiple crises, the war in Ukraine, rising inflation and interest rates, and fears of a coming recession. Flows over the first half of 2022 were still up as the strong growth momentum of 2021 was maintained in the first quarter.
- Flows to developed economies were 22% lower in the second quarter of 2022 compared to the average of 2021, at an estimated $137 billion. In Europe, flows to EU countries were up 7%, while in countries outside the EU inflows fell by more than 80%. Inflows in North America were 22% lower as cross-border M&As targeting United States firms more than halved.
- FDI flows to developing economies as a group showed some resilience, increasing by 6% to $220 billion, but driven mostly by continued growth in several large emerging economies. Flows to Latin America and to developing Asia were up, maintaining strong first quarter momentum, while flows to Africa nearly dried up completely.
- New investment project announcements, an indicator of forward trends, weakened in the first three quarters of 2022. The number of greenfield project announcements (mostly in manufacturing) fell by 10%; the number of international project finance deals (mostly in infrastructure) stagnated at the 2021 level. In both cases, monthly numbers show a downward trend. The biggest declines in new investment project announcements were registered in developed economies, in Latin America and in Central Asia.
- Project numbers fell across most industries, with few exceptions, notably in extractives and petrochemicals. Greenfield project values still increased due to a few large announcements concentrated in electricity and gas supply.
- The outlook for global FDI in 2022 remains bleak due to the multiple ongoing geopolitical and economic crises. Tightening financial conditions and heightened investor uncertainty are visible in the declining monthly trends in new project announcements.