OECD: Foreign Direct Investment Decreases in Q2 2013

The full report from the OECD can be downloaded here.  Highlights from the report:

Preliminary data for Q2 2013 show that global FDI activity declined by 28% (to USD 256 billion) after two consecutive quarters of increases, marking a return to the steady downward trend that started in Q1 of 2012. 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. Nineteen OECD countries had either negative FDI inflows or outflows (or both).

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. Outward investment from OECD economies declined by 20% to USD 155 billion and inward investment into the OECD declined by 26% to USD 137 billion. As a whole, investment from the European Union dropped 82%, from USD 44 billion to USD 8 billion. Germany experienced particularly severe declines in FDI outflows (from USD 25 billion to USD 6 billion) which are mostly due to negative outflows of intercompany debt (USD -6 billion), resulting in particular from large long term loans extended by branches established in the Netherlands back to affiliated enterprises in Germany.

Investment by non-OECD G20 countries decreases by 92%

The sharp decline in investment from non-OECD G20 countries, from USD 82 billion to USD 6.5 billion, was mainly due to the collapse in international investment from Russia, after exceptionally high levels of investment outflows observed in the first quarter (Russian outflows dropped from USD 54 billion in Q1 to USD 1 billion international divestment in Q22), as well as declines in investment from Brazil (which had USD 10 billion in divestment in Q2) and China (which had a decline of around USD 6 billion).

China, the UK, and the US receive half of global FDI flows

In Q2 2013, three countries received 47% of global FDI inflows. China attracted the lion’s share (USD 61 billion, or 21% of total) followed by the United Kingdom (USD 41 billion) and the United States (USD 38 billion). 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 inflows is largely due to divestments in OECD countries. The declines in inflows to Canada (41% decrease, to USD 11 billion) and Spain (48% decrease, to USD 6 billion) were particularly large.

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