As 2023 draws to a close, it is time to take stock of another year of foreign direct investment (FDI).

Geopolitics, technological disruption and the energy transition have underpinned corporate expansion and globalisation. High debt levels, inflation and higher interest rates weighed on financing availability and business models. Consumers faced cost-of-living pressures the world over. And conflicts, including in Ukraine, the Middle East, Central Asia and sub-Saharan Africa, created human suffering, risk and uncertainty.

Our weekly Graph Time data stories explored major trends affecting FDI and economic development. Here is our pick of the ten data visualisations from 2023:

Several countries broke FDI records this year. Between January and August 2023, six economies — Morocco, Malaysia, Iraq, Israel, Democratic Republic of Congo and Finland — attracted record planned FDI projects, according to fDi Markets figures dating back to 2003. Israel’s FDI figures were recorded before the latest conflict erupted with Palestinian militant group Hamas in the Gaza Strip.

Another five countries recorded their largest announced FDI since before the global financial crisis ended in 2009. These FDI results are reflective of mega projects worth at least $1bn announced in both fossil fuels and strategic industries, notably by Chinese companies. 

A new age of industrial policy shaped global investment decisions in 2023. At least $224bn worth of manufacturing projects were announced in the US since Washington DC passed landmark legislation focused on clean energy and strategic industries.

Several countries have complained through international bodies like the World Trade Organization that these subsidies create an unfair playing field. Competing legislation has been passed in the EU, UK and South Korea, where policymakers worry about their industries shifting to the world’s largest economy.

Chinese multinationals came of age in 2023. Outbound greenfield FDI from China topped an estimated $140bn, more than any full-year on record, according to fDi Markets data up to November. This is up from the $110bn recorded in the first eight months of the year.

Greenfield FDI expansions compare to a decline of outbound Chinese mergers and acquisitions (M&As). This comes as Western governments have increasingly scrutinised proposed M&A deals.

Amid heightened geopolitical tensions, expanding into new markets has become central to Chinese companies in strategic sectors like clean energy and electric vehicles.

The impact of Russia’s full-scale invasion of Ukraine continued to impact FDI decision making this year. More than 1000 companies have curtailed operations in Russia, but many have continued to operate in the country, according to a list compiled by Yale University.

Household names who left Russia, such as Carlsberg and McDonald’s, have shifted their attention to other markets in Asia. Assets in Western countries controlled by Russian-sanctioned individuals or entities have also been snapped up by investors. This includes Italy’s Marcegaglia acquisition of Russian steelmaker Severstal’s EU business. 

The energy transition was central to corporate decision making and political discourse in 2023. Several pledges were made at the UN’s Cop28 climate summit held in Dubai. They included more than 120 countries agreeing to triple the world’s renewable energy generation capacity to at least 11,000 gigawatts by 2030.

Fraught diplomatic discussions over the phasing out of fossil fuels proved diverging opinions about the green transition and the void in energy investment between countries. 

In 2022, renewable energy accounted for the vast majority (88%) of FDI into energy projects in advanced economies. By comparison, renewables made up only two-thirds (67.7%) of all energy FDI into developing countries last year. 

Coal, oil and natural gas are still viewed as an important way to boost development in many emerging markets. Total implicit and explicit fossil fuel subsidies worldwide in 2022 amounted to about $7tn, up by 18.3% from the previous year, according to the IMF.

Artificial intelligence (AI) dominated headlines in 2023. The release of OpenAI’s ChatGPT in November 2022 increased public awareness of the potential of technology that has been in development for decades.

AI will have huge implications across all global industries. Yet talent behind its development is concentrated in just a few locations. In Europe, London has by far the largest number of AI engineers, followed by Paris and Zurich. As a share of all software engineers, Dublin has the highest concentration of AI engineers.

Higher rates and an increased focus on profitability continued to disperse in the tech and venture capital (VC) industry. Major players like Spotify and American tech giants announced thousands of job cuts to unwind over hiring during the pandemic.

In the period up to September 14, VC-backed exits worth $32bn were tracked by PitchBook. This was less than half the $76.5bn seen in the whole of 2022 and barely 4% of the value in the peak year of 2021.

China championed efforts to build alliances with countries outside of Western geopolitical blocs. In August, the leaders of Brazil, Russia, India, China and South Africa (Brics) invited six countries to join their club. 

The economic influence of the expanded ‘Brics+’ emerging market bloc is now much greater due to countries like the UAE and Saudi Arabia, which are both major overseas investors. In 2022, about a third of all FDI announced in the Brics+ region originated from other countries within the bloc, compared to a mere 1% from within the original Brics, according to fDi Markets. 

Efforts to reduce the role of the US dollar in trade, finance and investment also gained momentum. These signals all point to a new paradigm of globalisation increasingly defined by countries outside the richest, mostly Western, nations.

Several risks remain in the post-pandemic world. The commercial real estate industry has taken a hit from higher rates, inflation and shifting work patterns.

More owners of US offices are missing payments on their commercial real estate loans, according to data from Trepp, a real estate analytics firm. In July, more than 4.95% of US office loans were delinquent in commercial mortgage-backed securities, meaning they were late on their payments by at least 30 days.

This debt distress is also being felt by countries. Public debt payments by the poorest nations topped $443bn in 2022, limiting their ability to attract FDI.

Several economies have strong investment momentum going into 2024. This is shown by an fDi study, which assesses the macroeconomic and FDI trajectories of the world’s top 50 FDI destinations.

Asia performed particularly well, given that Cambodia led the list, followed by the Philippines in second place. Iraq came fourth, Kazakhstan in sixth, Azerbaijan in seventh and India in 10th. Investors should keep track of these markets in 2024 and the opportunities they may offer given strong recent FDI performance and expected economic growth in the new year.

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