WASHINGTON, January 12, 2009: The world economy, mired in a severe financial and credit crisis, is moving into the danger zone, threatening development progress of the last decade in many countries.
The World Bank’s Global Economic Prospects reportexpects developing country growth to decline from 7,9 percent in 2007 to 4,5 percent this year. Investment growth in the developing world is projected to fall from 13 per cent in 2007 to 3,5 percent in 2009, due to tighter credit conditions and less appetite for risk.
A change in lending behavior and a general reassessment of credit risk has added new uncertainties and risks to the world economy, resulting in a negative impact on foreign direct investment (FDI).
Economic growth in developed countries—one of the key drivers of FDI flows in past years—has slowed markedly since the fourth quarter of 2007. As a result, FDI flows in 2008 saw a 10 per cent decline from 2007. This was highlighted by the UN Conference on Trade and Development(UNCTAD) in its World Investment Report 2008.
FDI is a very powerful engine of development and growth in emerging and transition economies. However, current international financial market sentiment is contributing to uncertainty in long-term investment decisions.
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