Catalina Espinosa
Research expert covering society, economy, and politics for Europe and the EU
Foreign direct investment (FDI) in Europe - statistics & facts
Foreign direct investment (FDI) plays an important role in the European economy, with the stock of direct investments in the EU being worth almost 12 trillion U.S. dollars. FDI projects also create hundreds of thousands of jobs each year and foreign affiliates are a vital source of innovation and growth in the European economy. Conversely, Europe is one of the leading regions for outward foreign direct investment, with the stock of outward FDI from the European Union being worth 13.5 trillion U.S. dollars in 2022. Foreign direct investment is generally defined as an economic actor in one country making an investment in another country which establishes a lasting interest and requires the investor to take up an active role in the management of the acquired firm, rather than foreign portfolio investment (FPI) where the investor has a passive financial interest in the target company.
FDI allows foreign companies to more easily compete in the domestic market, while the domestic economy is boosted by this investment, both in terms of increasing production, as well as in boosting human capital of domestic workers and fostering technology transfer. Key examples of FDI in Europe in recent years include American car-maker Tesla's investments in its production facilities in Eastern Germany, while the company's Chinese rival BYD opted to invest in Hungary. Foreign-controlled enterprises, particularly those in the banking, finance, pharmaceutical, and technology industries, play an outsized role in the economies of several smaller European countries, with foreign companies being attracted to invest in countries such as Luxembourg and Ireland due to their more lenient investment, taxation, and corporate governance regimes.
FDI allows foreign companies to more easily compete in the domestic market, while the domestic economy is boosted by this investment, both in terms of increasing production, as well as in boosting human capital of domestic workers and fostering technology transfer. Key examples of FDI in Europe in recent years include American car-maker Tesla's investments in its production facilities in Eastern Germany, while the company's Chinese rival BYD opted to invest in Hungary. Foreign-controlled enterprises, particularly those in the banking, finance, pharmaceutical, and technology industries, play an outsized role in the economies of several smaller European countries, with foreign companies being attracted to invest in countries such as Luxembourg and Ireland due to their more lenient investment, taxation, and corporate governance regimes.
