Large-scale repatriations of profits by US multinationals from the Republic of Ireland meant total foreign direct investment (FDI) fell by $121 billion (€106 billion) last year.
The decline comes as preliminary figures from the United Nations Conference on Trade and Development (Unctad) show global FDI inflows slumped by 19 per cent to $1.2 trillion last year.
This marks the third consecutive annual drop and brings FDI flows back to the low point reached after the global financial crisis.
According to Unctad, the impact of the US tax reforms is a 73 per cent decline in flows to Europe to just $100 billion last year, a value last seen in 1994.
The statistics indicate FDI inflows to the Republic fell by $113 billion in the first three quarters, shifting from a positive reading of $22 billion for the nine months to the end of September 2017 to a negative reading of $91 billion for the same period a year later.
Slump
Astrit Sulstarova, who leads Unctad's investment trends and data section, told The Irish Times there was no doubt the slump in FDI locally was due to US companies sending money back home.
“The main reason for the decline is the repatriation of profit by the US multinationals,” he said.
Mr Sulstarova highlighted the reading for intra-company loans, which show outflows jumped from $26 billion in the first nine months of 2017, to $64 billion a year later. He attributed this to foreign affiliates in Ireland “either paying back their loans to their parents or providing new ones to them”.
The jump in outflows follows the introduction of tax reforms in the US under president Donald Trump last year that gave multinationals a one-time special rate of 15.5 per cent on the repatriation of profits earned abroad.
The global decline in FDI last year was largely concentrated in so-called developed economies where inflows fell by 40 per cent to an estimated $451 billion. In contrast, FDI to developing economies remained resilient, rising 3 per cent last year.
Disagreement
It should be noted that there is disagreement regarding the usefulness of comparing intra-company fund movements with higher impact FDI, such as the establishment of new operations or the purchase of new assets.
Nonetheless, the figures show that US tax reforms are having an impact globally, although Unctad forecast FDI will likely rebound in 2019 from what it described as “anomalously low” levels last year.
