Deals by Multinational Enterprises Impacted EU FDI Flows

Transactions by multinational enterprises (MNEs) in conduit economies continue to affect foreign direct investment (FDI) flows in developed countries. Excluding conduit economies, FDI in Europe fell by 45%. In the European Union, flows declined in 18 of the 27 member states, the United Nations Conference on Trade and Development (UNCTAD).

In its latest report entitled “Global Investment Trends Monitor,” UNCTAD said that the largest economies and FDI recipients all experienced lower inflows, with Germany and Poland down 60%, Italy 35%, and Spain and France 13% and 6%, respectively. In contrast, FDI rose 13% in North America, with a 10% increase in the US caused mostly by higher M&A values.

Cross-border M&A activity, which typically accounts for a large share of FDI in developed countries, rose by 19% to $364 billion largely due to an 80% surge of M&A sales in the US.

Large deals in developed countries included a group of investors acquiring the fixed network business of Telecom Italia SpA (Italy) for $24 billion, Aon PLC (Ireland) purchasing insurance company NFP Corp (US) for $13 billion, and Carrier Global Corp (US) buying Viessmann Climate Solutions SE (Germany) for $13 billion.

There were also notable divestments to domestic companies in 2024, including the Royal Bank of Canada’s acquisition of HSBC Bank’s Canadian operation for $10 billion and the merger of Masmovil Ibercom SA (Masmovil) (Spain) with the Spanish operations of Orange Espagne SA (France) for $8 billion.

Several European economies, including Ireland, Luxembourg, the Netherlands, Switzerland and the UK, where FDI statistics were significantly affected by conduit financial flows, continued to report large fluctuations in flows and negative numbers over 2023 and 2024.

Less negative numbers in 2024 than in 2023 exert a net positive effect on global flows of about $270 billion.

Middle East

Coming to the Middle East, the region attracted $70 billion in FDI last year, marking a 13% increase y-o-y, with diversification initiatives and mega-projects in renewable energy, technology, and tourism leading the way by majority nations.

Saudi Arabia recorded $30 billion in FDI inflows, spurred by transformative projects like the $500 billion Neom project.

Global FDI Declines

The report also said that global foreign direct investment (FDI) declined 8% in 2024, excluding financial flows through European conduit economies. Including these economies, global FDI reached an estimated $1.4 trillion, an 11% increase from 2023.

The greenfield project announcements, primarily in industrial sectors, saw a moderate decline of 8% in number and 7% in value. Despite the drop, the value of greenfield projects remained high, second only to the record reached in 2023, driven by large-scale investments in semiconductor manufacturing and AI technologies.

International project finance, mainly concentrated in infrastructure sectors, continued its downward trend with the number of deals falling by 26% and their value declining by nearly a third. Cross border M&A activity (the number of deals) fell by 13%, but total values increased by 2%, with high-value deals propping up FDI flows in several developed countries.

Prospects for 2025

The outlook for global FDI in 2025 will hinge on economic, geopolitical, and policy factors. Overall, there is potential for moderate growth in global FDI flows, with significant regional variations, the report noted.

Flows are expected to grow more rapidly in the US due to strong economic growth prospects, and in the European Union, which currently has very low levels of investment.

Regions that are adjacent to or well-connected with major developed markets, such as ASEAN, Eastern Europe, West Asia, North Africa, and parts of Central America, could also benefit from global supply chain restructuring.