International investment resumes retreat – OECD

Preliminary data for Q2 2013 show that global FDI activity declined by 28% (to $256bn) after two consecutive quarters of increases, marking a return to the steady downward trend that started in Q1 of 2012, the OECD revealed.

The magnitude of the Q2 decline brought global FDI flows for the first half of 2013 down 16% compared with the first half of 2012. In a record number of OECD countries international investors pulled more money out than they invested, the report said.

Unlike earlier stages of the global economic crisis that started in 2008,
when emerging economies played a counter cyclical role in international investment flows, the declines in Q2 were across the board.

As the report reads, outward investment from OECD economies declined by 20% to $155bn and inward investment into the OECD declined by 26% to $137bn.

As a whole, investment from the European Union dropped 82%, from $44bn to $8bn, according to the OECD.

Germany experienced particularly severe declines in FDI outflows (from $25 bn to $6bn) which are mostly due to negative outflows of intercompany debt ($6bn), resulting in particular from large long term loans extended by branches established in the Netherlands back to affiliated enterprises in Germany.

According to the OECD report, in Q2 2013, three countries received 47% of global FDI inflows. China attracted the lions share ($61bn, or 21% of total)
followed by the United Kingdom ($41bn) and the United States ($38bn).

In the OECD area, FDI inflows decreased by 26% compared to the previous quarter, representing 46% of global FDI inflows. As with outflows, the decrease in inflow is largely due to divestments in OECD countries.

Not all countries experienced declines. FDI inflows increased in Australia (from $10bn to $12bn), the United Kingdom (from $34bn to $41bn), and the United States (from $29bn to $38bn).

Mexico recorded its highest level of investment inflows (from $5bn to $18bn) , boosted by Belgian based beer giant Anheuser Busch InBev’s acquisition of Grupo Modelo, the OECD added.

Click here to read full report.

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