WASHINGTON—Foreign direct investment into emerging markets—the lifeblood of economic growth for industrializing nations—is set to slide to postcrisis lows this year, curbed in part by U.S. President Donald Trump’s protectionist trade agenda.
The Institute of International Finance, a group representing more than 500 of the world’s biggest banks, hedge funds and other financial firms, said Thursday that foreign direct investment is likely to fall to $386 billion this year. That would be down nearly 30% from just three years ago and the weakest level since the 2008 financial crisis.
The IIF’s forecast suggests another dour year of capital flows and economic growth for emerging markets after China’s slowdown and a commodity-price plunge suffocated foreign investment over the last two years.
The figure is another marker in a broader slowdown in globalization worrying policy makers around the world. Many countries, contending with anemic demand from abroad and lacking the political will for economic overhauls at home, are turning to more protectionist leadership to revive their fortunes.
Investors are showing greater caution about higher-risk investments overseas, particularly as the Federal Reserve starts to raise rates and the U.S. economy continues to expand at a faster clip.
The International Monetary Fund last month downgraded the growth outlook for many emerging markets.