A new report from the United Nations Conference on Trade and Development (UNCTAD) has noted the global investment climate in 2022 was “extremely gloomy” with “cascading” geopolitical and economic events damaging investor confidence all across the globe.
In 2022, global foreign direct investment (FDI) dropped 12% to $1.3 trillion after rebounding strongly in 2021 following the end of the pandemic, according to the World Investment Report 2023 by UNCTAD.
The drop was attributed to several simultaneous shocks to the global economic system, including the conflict in Ukraine, inflation, rising interest rates, and skyrocketing public debt.
UNCTAD Secretary-General Rebeca Grynspan said, “Rising inflation, fears of a recession and turbulence in financial markets put many investment plans on hold at the beginning of the year.”
The report noted that the challenges to the global economic system particularly hurt the financing of international projects, and cross-border mergers and acquisitions.
Developed economies were hit hardest by the declines in investment, as FDI fell by 37% to $378 billion under the weight of larger financial constraints, higher interest rates, and concerns over the stability of capital markets.
The decline in FDI flows was produced primarily by multinational enterprises in developed economies, as supply disruptions affected numerous industries across the globe.
