Global flows of foreign direct investment (FDI) fell 13 per cent in 2016 to an estimated $1.52 trillion as global economic growth remained weak and world trade volumes posted anemic gains, according to the latest UNCTAD Global Investment Trends Monitor.

The US remained the largest recipient of FDI, attracting an estimated $385 billion in inflows, followed by the UK with flows of $179 billion, vaulting up from 12th position in 2015. China remained in third position with a record inflow of $139 billion.

"FDI recovery continues along a bumpy road. Particularly of concern is the sharp drop-off in manufacturing investment projects, which play such an important role in generating badly needed productivity improvements in developing economies," UNCTAD secretary-general Mukhisa Kituyi said.

"Looking ahead, economic fundamentals point to a potential increase in FDI flows by around 10 per cent in 2017," Dr Kituyi said. "However, significant uncertainties about the shape of future economic policy developments could hamper FDI in the short-term."

The decline of FDI in 2016 was not equally shared across regions, reflecting the heterogeneous impact of the current economic environment on countries worldwide, the report said.

FDI flows to Europe fell 29 per cent to an estimated $385 billion, with a number of countries experiencing strong volatility in their inflows. This decline was tempered by modest growth in flows to North America (6 per cent) and a sizeable increase in investment in other developed economies, principally Australia and Japan.

Slowing economic growth and falling commodities prices weighed on FDI flows to developing economies. Inflows to these economies fell 20 per cent (to an estimated $600 billion) due to significant decreases in developing Asia and in Latin America. Nevertheless, developing economies continue to comprise half of the top 10 host economies.

Flows to India fell by 5 per cent to an estimated $42 billion, but nevertheless ranked among the top 10 largest FDI recipient economies. In contrast, foreign investment in mainland China remained robust rising by 2.3 per cent to a new record of about $139 billion.

FDI flows to transition economies rose by 38 per cent to an estimated $52 billion.

The wave of cross-border mergers and acquisitions shows signs of ebbing. A 13 per cent increase in the value of net sales, which rose to $831 billion, pales when compared to the 67 per cent and 68 per cent increases registered in 2014 and 2015. Greenfield FDI project announcements value rose by 5 per cent, but this was largely due to a handful of very large projects in a few countries. The vast majority of countries, in contrast, registered declines, the report said. - TradeArabia News Service