Foreign direct investment in developing nations will drop by $180 billion, or 31 per cent, this year as a global recession prompts multinationals to cut spending on factories and mines, according to the World Bank.
The decline will put renewed pressure on emerging-market currencies, even as asset sales by fund managers slow, according to Mansoor Dailami, manager of international finance in the global development prospects group. Rallies in the South Korean won, Brazil’s real and the Polish zloty have all faltered since the end of 2008 as companies including Rio Tinto Group and Honda Motor Co put expansion plans on hold.
“This is the most serious reaction so far to the global recession, the factory level,” Dailami, who joined the bank in 1986, said in an interview in Washington. “ In 2008, it was a stocks and portfolio story. This year, it will be an FDI story.”