A report from the UK’s Economic Research Council has revealed a decline in the average global rate of return on foreign investment. 

The average rate of return (RoR) for global FDI fell to 6.7% in 2017 from 8.1% in 2012, according to the UK’s Economic Research Council (ERC), and prospects for improvement may be dampened by the drop in global FDI in 2017.

Although the returns on FDI in developed economies were typically lower than those of developing countries, their returns remained the most stable, only falling slightly from 6.7% to 5.7% between 2012 and 2017.

While African economies saw an upturn on returns in 2017, the continent suffered the most between 2013 and 2016, which saw RoR drop by 56%. Countries in the Caribbean and Latin America were also hit badly, with returns falling to 5.2% in 2015 from 7.9% in 2012. 

Global RoR, especially in the developing world, may continue to decrease because global investor spending dropped by 23% in 2017 compared with 2016, according to a report published by the United Nations Conference on Trade and Development in June.

FDI returns in Africa, Asia (particularly the west), Latin America and the Caribbean have been blighted by the drop in the price of oil and other commodities, said the ERC.

“In Latin America and the Caribbean, foreign investment into natural resources suffered a drop of 62% since 2011, initially due to the fall in commodity prices but likely also hampered by political scandal in Brazil and instability in Venezuela,” added the ERC report.

African FDI has declined in volume, again due to the commodity price collapse, while FDI across the continent suffers from unequal distribution, with Angola, Egypt, Nigeria, Ghana and Ethiopia accounting for more than half of FDI inflows, according to the ERC.

This article is sourced from fDi Magazine
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