In line with their economic rise, emerging markets have increased in importance in recent years not only as destinations for foreign direct investment but also as sources of investment as well. But with an economic downturn hitting most of the developing world, will this growth in outward FDI (OFDI) continue?
Midyear data from fDi Markets, an FT data service, indicate that foreign companies are pulling back, with greenfield investment into most emerging markets far below what it had been for the first half of 2014 and several major EMs seeing large declines.
For domestic EM companies, two possible reactions could be expected: slowing growth at home could force them to look further afield for business opportunities, thereby leading to an increase in OFDI from emerging markets; or worsening economic conditions in their home markets could hit company balance sheets, making it harder to fund international expansion and causing a retrenchment from global markets.