The foreign direct investment (FDI) landscape for 2024 is riddled with geopolitical and macroeconomic uncertainties, yet developing economies emerge with renewed optimism. Despite the initial gloom, nuances in the global economic cycle suggest brighter prospects, especially for developing regions.
Anticipated interest rate reductions in the US and Europe, as inflation eases, are expected to stimulate multinational enterprises. With domestic markets in advanced economies projected to grow by only 1.4% as per IMF estimates, these enterprises are likely to redirect their resources towards more lucrative opportunities in faster-growing developing economies.
Resource-rich regions are poised to gain from the combination of more capital and a strong commodity cycle. As Charlie Robertson from FIM Partners points out, Africa and the Middle East are set to attract significant FDI in 2024, driven by their geographical, geological, and geopolitical advantages. The IMF forecasts growth acceleration in Sub-Saharan Africa and the Middle East and Central Asia.
Developing Asia’s outlook, however, is somewhat tempered by China’s slowdown. Despite this, Lawrence Yeo of AsiaBIZ Strategy sees potential due to underinvestment in many countries. FDI flows to Asia are recovering but expected to slow down in 2024. Yeo draws inspiration from Rabindranath Tagore’s quote, suggesting that Asia, particularly the Association of Southeast Asian Nations, may find opportunities amidst the challenges, buoyed by stronger regional trade and investment flows and the restructuring of China-centric value chains.
Countries like Cambodia, the Philippines, and India are carrying strong FDI momentum into the new year, as indicated by the FDI Standouts Watchlist 2024.
In the US, an eventful election year awaits, culminating in the presidential election on November 5. Despite economic recovery defying expectations and investment activity remaining high, speculative projects may face bottlenecks. Didi Caldwell of Global Location Strategies predicts a strong year for economic development projects in 2024, but with a shift in project types. Reliable funding and strong business cases will be key, as projects heavily dependent on government subsidies may not progress. The IMF expects growth rates of 1.4% in the US and 1.6% in Canada.
Europe also braces for a politically consequential year with general elections in the UK and the European Parliament. Despite social and political fragmentation, Europe’s economic policies have fostered a more cohesive trade and investment bloc. Martin Kaspar, an FDI expert, notes the potential for reshoring back to Europe amid US-China tensions. He observes a shift in Germany’s political landscape and Poland’s retreat from nationalistic tendencies. The IMF projects growth in the euro area and the UK to be modest.
In summary, 2024’s FDI outlook presents a mixed bag with challenges and opportunities. Developing economies, with their growth prospects, appear poised for FDI inflows, while developed regions navigate through political and economic complexities. The year ahead promises to be dynamic and pivotal for global investment trends.
