Global executives are upbeat about the world’s FDI prospects, and despite fiscal uncertainty in the US, an unresolved sovereign debt crisis in the EU and a possible economic slowdown in China, A T Kearney’s 2013 FDI Confidence Index reported that 50% of executives surveyed were more optimistic about global recovery in 2013 than they were in 2012. In its recent survey of more than 300 executives from 28 countries, A T Kearney, a management consulting firm, found that executives expected slow but steady growth across most parts of the world this year, and 78% of executives expect some growth in developing markets.
The US was ranked first place in the FDI Confidence Index, with 63% of respondents expecting some growth from the country's economy. Although its fiscal gridlock still poses investors a major risk, the US’s housing market has begun showing signs of recovery, and its exports have improved due to a weaker dollar. This led executives to expect a steady recovery.
Germany and the UK were highlighted by A T Kearney as “the brightest spots” in Europe as 34% and 24% of respondents, respectively, were more positive about their prospects. This was an improvement from the 26% and 16% of respondents, respectively, who reported similar expectations last year.
Developing countries have evolved from being perceived as temporary safe havens for global companies that are suffering a slowdown in developed markets, to being complementary destinations in companies' investment portfolios. Prudent domestic policies and internal market investments by governments in Brazil, India and Mexico have led these countries to feature in the top 10 category, and A.T. Kearney asserted that the traditional view of developing markets as “high risk” is changing. In its report, it asserted: “Investors say that developing markets have roughly the same level of risk as developed markets.”
Investors are expected, however, to hold back on their investments, amid a range of near-term risks posed by China’s economic slowdown and the eurozone’s protracted debt crisis. The EU was a notable exception in executives’ improving expectations, with 62% of executives anticipating modest growth in the eurozone at best, and a possible return to a recession in the next three years, at worst. Although 50% of executives reported that FDI has returned to pre-2008 levels at their companies, 25% of respondents said that FDI peaks that were witnessed in the run up to 2008 will not be repeated for at least two years.