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FDI from OECD countries jumps 50% in 2007 but set to fall in 2008

 

24/06/2008 - Foreign direct investment (FDI) outflows from OECD countries in 2007 leapt to a record USD 1.82 trillion from USD 1.2 trillion in 2006 but are projected to fall sharply in 2008, according to estimates from the OECD. If a slowdown in merger and acquisitions observed in the first half of 2008 continues, FDI outflows could fall to USD 1.14 trillion.

FDI inflows to OECD countries rose to USD 1.37 trillion in 2007, up from USD 1.05 trillion in 2006 and up slightly from the previous record of USD 1.29 trillion set in 2000. But FDI inflows are projected to fall back in 2008 to USD 1.035 trillion.

The projected fall in FDI outflows from OECD countries in 2008 will also impact developing countries.

Based upon the historical relationship between developing country inflows and OECD outflows, the projected 37% drop in OECD outflows in 2008 could result in a decline of around 40% for developing country inflows to around USD 276 billion from their 2007 record of USD 471 billion.

The new records set in 2007 for OECD inflows and outflows were helped by the fall in the US dollar against most other major currencies. (In addition to greenfield investment and mergers and acquisitions, FDI includes reinvested earnings, cross-border loans and capital transactions between related firms.)

  • The United States continued to hold its position as the top OECD investor and recipient of foreign investment in 2007, with USD 333 billion in outflows and USD 238 billion in inflows.
  • The United Kingdom was second, with USD 230 billion in outflows and USD 186 billion in inflows, followed by France with inflows of USD 158 billion and outflows of USD 225 billion.
  • FDI inflows into Spain increased by more than 80% in 2007, mainly due to a large Italian investment in the electricity sector.
  • Foreign investment in Japan was exceptionally high by historical standards at USD 22.5 billion, largely due to major investments in the financial sector and the capitalisation of foreign subsidiaries in Japan engaged in real estate investment.
  • FDI into developing economies reached a record USD 471 billion in 2007, an increase of almost 30% over the previous record of USD 368 billion set in 2006. Brazil, Russia, India, China and South Africa accounted for approximately 50% to 60% of developing country inflows.

For further information, journalists should contact Michael Gestrin of OECD’s Investment Division (tel. + 33 1 45 24 76 24).