PARIS - Foreign Direct Investment (FDI) fell by 20% in the first half of 2019 compared to the last half of 2018, to USD 572 billion. The uncertainties regarding trade tensions and prospects for future economic growth likely contributed to the decrease, according to the OECD.
On the other hand, the immediate impacts of the 2017 United States tax reform, which reduced US outward FDI flows and, thus, global FDI in 2018, appear to have lessened so far in 2019.
Among the findings are that:
· Inflows to the OECD area decreased by 43%, largely driven by reduced flows to the Netherlands, the US and the United Kingdom and by disinvestments from Belgium and Ireland. Outflows from the OECD area increased by 2%.
· FDI flows to the US from China dropped from a peak of USD 16 billion in the second half of 2016, to less than 1.2 billion as Chinese companies are investing less and selling off some of their direct investments in the US.
· While the immediate impact of the 2017 US tax reform lessened, reinvestment of earnings by US companies remained below half-year levels recorded in the period 2013-2017, perhaps reflecting a “new normal” as US companies have less incentive to hold money at their foreign affiliates.
· FDI inflows to non-OECD G20 economies increased by 21% and FDI outflows remained stable.
The report is available at http://www.oecd.org/investment/FDI-in-Figures-October-2019.pdf