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Investment dries up

The fallout from uncertainty that continues to undermine the global economy is reflected in international investment, which is falling once again, following two years of steady gains.

In 2011, international mergers and acquisitions (IM&A) had risen back up to just over $1 trillion. But according to the OECD’s Investment News, investment activity is projected to decline by as much as 36% in 2012, to $675 billion. 

This drop has been accompanied by increased international divestment by firms. When this divestment is taken into account, the resulting net IM&A drops to $317 billion, the lowest level seen since 2004.

As the euro crisis drags on, Europe is expected to experience the largest drop in outward investment, a staggering 48%. Investments by Africa and the Middle East, North America and Asia are also expected to drop significantly. Latin America had seemed to be bucking the trend as intra-regional deals in airlines, steel, telecommunications and retail buoyed activity. However, IM&A into Latin America is set to fall by 30% in 2012.

The steep declines in IM&A reflect a deepening mistrust in the global state of affairs–from concerns that the US is heading for a “fiscal cliff” to slowing growth in China–that sees countries succumbing to a protectionist impulse in their trade and investment.

See www.oecd.org/investment

See also the OECD Investment News

©OECD Observer No 293 Q4 November 2012