In all regions and subregions except Central America, FDI inflows grew less in local currency terms than in dollar terms. The difference was particularly pronounced in the euro zone in 2006-2007, given that the dollar hit a record low against the euro.
A similar situation prevailed with respect to flows
to South-East Asia, where many Asian currencies
(e.g. Malaysian ringgit, Thai baht) appreciated
considerably with respect to the dollar. That being
said, estimates of global FDI flows in national
currencies still point to an increase.
Source: UNCTAD, FDI/TNC database (www·unctad·org/fdistatistics)
and own estimates.
Growth rates for world/region are weighted averages of country growth rates.
The weight for each country is its share in the starting year in total FDI flows to
the world/region denominated in dollars. Weighted growth rate for world/region is
calculated using the following formula:
where the growth rate is calculated on the basis of FDI inflows denominated in
local currencies.
The continued rise in FDI in 2007 largely
reflected relatively high economic growth and strong
economic performance in many parts of the world.
Increased corporate profits of parent firms (figure I.2)
provided funds to finance investment and reduced the
impact of decreasing loans from the banks affected
by the sub prime credit crisis. In foreign affiliates,
higher profits, amounting to over $1,100 billion in
2007 (figure I.3), contributed to higher reinvested
earnings, which accounted for about 30% of total
FDI flows in 2007 (figure I.4). These profits are
increasingly generated in developing countries rather
than in developed countries.