The rise of protectionism: Why foreign investment is falling globally

The Organisation for Economic Co-operation and Development (OECD) expects declining foreign investment between economies to recover eventually, despite the trend suggesting a more protectionist world order.

“We are seeing a rise in protectionism around the world,” OECD chief economist Clare Lombardelli told Markets with Madison while she was visiting New Zealand this week.

“There is an element of globalisation slowing down ... And you can see that, for example, in the numbers of trade restrictions there are between countries.”

However, Lombardelli believed it would recover as inflation and central banks returned to more normalised monetary policy settings, encouraging investment.

“So much of this is cyclical, and it’s being driven by the weaker economy. We expect it should recover as economies recover.”

Foreign direct investment fell 7 per cent globally last calendar year to US$1.36 trillion ($2.26t) according to the OECD, with inflows declining in two-thirds of OECD member countries.

The largest receivers of investment were the US, Brazil and Canada, while investment in China had turned negative.

In a report analysing the state of New Zealand’s economy this week, the OECD wrote that our country had one of the most restrictive foreign investment regimes in the world.

It was a trend increasingly being seen across the world, other OECD reports suggested, as more countries increased and broadened foreign investment screening policies over national security concerns.

Watch Clare Lombardelli discuss which advanced and emerging economies are set to benefit from foreign investment in today’s episode of Markets with Madison above.

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Disclaimer: The information provided in this programme is of a general nature, and is not intended to be personalised financial advice. We encourage you to seek appropriate advice from a qualified professional to suit your individual circumstances.

Madison Reidy is the host of the NZ Herald’s investment show Markets with Madison. She joined the Herald in 2022 after working in investment, and has covered business and economics for television and radio broadcasters.