A U.N. report issued Wednesday expects foreign direct investment to rise 5 percent this year to nearly $1.8 trillion, and it sees modest increases in such investment continuing into 2018.
Foreign direct investment, or FDI — investment made by a company or person in one country in business interests of another country — fell 2 percent in 2016 to $1.7 trillion. Economists at the U.N. Conference on Trade and Development, in the organization's World Investment Report 2017, projected a modest recovery this year due to expected higher economic growth across major regions, a resumption of growth in trade and a recovery in corporate profits.
James Zhan, director of the Investment and Enterprise Division at UNCTAD, cautioned that the prospect of modest recovery in FDI flows carried with it significant uncertainty.
"Global FDI flows remain at a low level, and the road to recovery remains bumpy. ... We see that the growth in developed countries is expected to improve, including in the United States through fiscal stimulus. And, the emerging and developing countries are also forecast to rebound significantly in 2017," Zhan said.
The report said the U.S., China and India were the top prospective destinations for FDI. It said developing countries as a group would gain about 10 percent. It noted FDI to Africa fell by 3 percent in 2016 to $59 billion, but it said investment was expected to rise modestly to about $65 billion in 2017.
The report said digital multinational enterprises were expanding faster than traditional forms of multinational corporations. It said two-thirds of the digital and internet content firms were in the U.S., United Kingdom and Germany, with few based in developing and transitional economies.
UNCTAD projected that digital FDIs would be the wave of the future. It urged developing countries to jump on the e-commerce bandwagon or be left behind. It said achieving adequate digital connectivity for most developing countries could be done for less than $100 billion, which it considered a modest sum.