FDI in Turkey hits $14 billion in 2021 as global flows rebound

Foreign direct investment (FDI) in Turkey soared 79% year-on-year in 2021, a report by the United Nations trade and development agency UNCTAD showed on Thursday, as Entries rebounded worldwide to regain pre-pandemic levels.

From a low base in 2020, global FDI flows increased by 64% to $1.58 trillion last year, according to UNCTAD’s World Investment Report 2022, driven by booming M&A activity and rapid growth in international project financing due to loose funding and major package infrastructure stimulus.

The figure had fallen to around $963 billion in 2020, well below the low point reached after the global financial crisis a decade ago, amid the global economic fallout from the pandemic.

Turkey saw FDI inflow reach $14 billion, compared to around $8 billion in 2020, when the country experienced a relatively smaller decline of 15%, compared to 35% globally.

Inflows since 2002 have topped the $240 billion level, a statement from the Presidential Investment Office said on Friday. He said the inflows financed 41% of the country’s total current account deficit.

Turkey’s share in global FDI flows increased to 0.9%, from 0.8% in 2021 and 0.6% in 2019. The country aims to increase this figure to 1.5%.

First British investor

Manufacturing, services and agriculture top the list of industries in Turkey, accounting for $8.4 billion of FDI inflows in 2021, a 116% increase from a year ago, a said the Office of Investment.

Investments in the real estate market soared 42.5% to $5.6 billion, he added.

European countries accounted for 60% of entries to Turkey, followed by Asia and the Americas with 23% and 16% respectively.

The UK is the largest investor among the nations, accounting for 19%, followed by the US and the Netherlands with 16% and 13%, respectively. Other major investors included Switzerland, the United Arab Emirates, Germany, South Korea, Japan and Qatar, according to the statement.

The top 10 economies for FDI inflows in 2021 were the United States, China, Hong Kong, Singapore, Canada, Brazil, India, South Africa, Russia and Mexico.

While the recovery benefited all regions, nearly three-quarters of the growth was concentrated in developed economies, where FDI flows soared 134% to $746 billion, according to the report.

Flows to developing economies rose 30% to $837 billion – the highest level on record – largely on strength in Asia, partial recovery in Latin America and the Caribbean and once again in Africa.

The share of developing countries in global flows remained slightly above 50%.

For structurally weak, vulnerable and small economies, FDI increased by 15% to reach 39,000 billion.

Announced international project finance deals reached a record 1,262 projects last year and their value more than doubled to $656 billion.

The war in Ukraine will hit investments

Meanwhile, UNCTAD said the outlook for this year is bleaker as the food, fuel and financial crises triggered by Russia’s war in Ukraine cloud the business climate.

“The global environment for international investment has changed dramatically with the start of the war in Ukraine,” said UNCTAD chief Rebeca Grynspan.

“War has effects far beyond its immediate vicinity, causing a cost of living crisis affecting billions of people.”

Investor uncertainty and risk aversion “could put significant downward pressure on global FDI this year,” the former vice president of Costa Rica said.

Signs of weakness are already emerging, UNCTAD said in its World Investment Report 2022.

Preliminary Q1 data shows greenfield project announcements fell 21% globally, cross-border M&A activity fell 13% and international project finance deals fell 4 %.

Greenfield investment generally refers to projects that create new physical facilities that are considered productive, in part because they normally create jobs. New greenfield projects are seen as an indicator of future FDI trends.

“This year, the business and investment climate has changed dramatically as the war in Ukraine has led to a triple crisis of high food and fuel prices and tighter financing,” UNCTAD said.

“Other factors darkening the horizon for FDI include renewed pandemic impacts, the likelihood of further interest rate hikes in major economies, negative sentiment in financial markets and a potential recession.”

The agency said the growth momentum of 2021 could not be sustained and that global FDI flows in 2022 would “likely follow a downward trajectory, remaining stable at best”.

Fears

“This fragile growth in real business investment is likely to persist into 2022,” said UN Secretary General Antonio Guterres.

“The fallout from the war in Ukraine with the triple food, energy and financial crisis, as well as the Covid-19 pandemic and the ongoing climate disruptions, add tensions, especially in developing countries.

“There is a significant risk that the momentum of international investment recovery will come to a premature halt, hampering efforts to boost financing for sustainable development.”

Sabah’s daily newsletter

Keep up to date with what is happening in Turkey, in its region and in the world.


You can unsubscribe anytime. By signing up, you agree to our Terms of Service and Privacy Policy. This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

About Louis Miller

Check Also

Adil Sami, expert investment advisor and owner of “Fortune Group Turkey”, helps others build generational wealth in modern times.

Adil Sami, Turkish entrepreneur and founder of “FOrtune Group Turkey”. After completing Southampton’s Chartered Accountancy …