The US was once again the No. 1 FDI destination of all countries in the world last year, while China dropped to third place in the world rankings. According to a related report from IMF partners, U.S. investment increased by $506 billion, or 11.3%, while various smaller economies appear to rank among the top 10 countries in the world. The Netherlands, second only to the United States, Luxembourg, Hong Kong, Singapore, Ireland and Switzerland, are among the top ten countries for foreign direct investment, although none of these countries are in the top ten countries in the world if the criterion is their GDP. According to IMF fellows Yannick Damgaard and Carlos Sanchez Munot, the fact that foreign direct investment has not kept pace with the size of the economy is related to the picture that emerges from only one set of statistics.

The IMF partner study was conducted in 112 countries and shows that over the past year, foreign direct investment increased by an average of 7.1% in national currencies, but when measured in dollars, growth is limited to 2.3% due to the strengthening of the US currency experienced in previous years. months. As two economists point out, recorded capital flows relate both to investment in productive activities within a country, such as, for example, production units, factories, and mechanical equipment, but in many cases they relate exclusively to investment in the financial sector without any connection to the real economy.

In addition, another study by Damgaard, Johansen, Lane and Ferretti, also IMF partners, shows that offshore financial centers play an important role in foreign direct investment. As you know, large funds go into them in order to get favorable tax treatment, as a result of which they end up misleading about the real amount of foreign direct investment, since it seems overpriced. Funds flowing into such centers have grown steadily since the global financial crisis in 2008, but their share of global investment has been gradually declining since 2017.