2017 A.T. Kearney Foreign Direct Investment Confidence Index
The United States tops the A.T. Kearney Foreign Direct Investment (FDI) Confidence Index for the fifth year in a row (see figure 1).2 Sustained investor interest in the US economy is likely the result of three factors. First, investors have an overwhelmingly positive outlook for the American economy this year (see figure 2). Second, the enduring attractiveness of the American market in terms of both its size and its transparent and relatively efficient legal and regulatory environment continue to make it a highly attractive investment location. And third, it is possible that the “buy American” and “make in America” policy commitments from the new Trump administration are motivating investors to gain a toehold in the US market with the aim of being perceived as a local rather than a foreign player.
Germany rises two spots to claim second place in the FDI Confidence Index, its highest ranking in the history of the Index. After holding the number two position for four consecutive years, China falls to third place in the Index this year. This happened despite investors’ outlook for the Chinese economy making a significant recovery, rising from a net assessment of –4 percent last year to +16 percent this year (see figure 2). The top five slots on the Index are rounded out by the United Kingdom in fourth place and Canada in fifth. These are the same five markets that held the top five spots last year, demonstrating the consistent appeal of these economies to foreign investors.
Below the top five spots, though, there are some significant changes. As in the past two years, investors display a notable preference for developed markets as investment destinations. This is likely in part because of their expectations for continued improvement in economic performance in these markets. For instance, the US economy is the one for which investors have the most optimism over the next three years, followed by Canada and Japan (see figure 2). Some European developed markets are also near the top of the list, but investors are less bullish about the UK economy over the next three years. And the overall performance of developed markets is somewhat weaker on the Index this year. After claiming 80 percent of the 25 spots in 2016, developed markets account for only 72 percent of this year’s Index. While still dominant as investment destinations, this year marks a reversal of a five-year trend in which developed markets’ share in the Index rose each year. Read more…