Global foreign direct investment collapsed in 2020, falling by 42% to an estimated US$859 billion from US$1.5 trillion in 2019, says UNCTAD’s 38th Global Investment Trends Monitor released on January 24.
Foreign direct investment (FDI) reportedly finished last year more than 30% below the trough after the global financial crisis in 2009 and back at a level last seen in the 1990s.
The decline was concentrated in developed countries, where FDI flows fell by 69% to an estimated US$229 billion. Flows to Europe dried up completely to -4 billion, including large negative flows in several countries. A sharp decrease was also recorded in the United States (-49%) to $134 billion.
The decline in developing economies was relatively measured at -12% to an estimated US$616 billion, according to the report. The share of developing economies in global FDI reportedly reached 72% – the highest share on record. China topped the ranking of the largest FDI recipients.
The fall in FDI flows across developing regions was uneven, with -37% in Latin America and the Caribbean, -18% in Africa and -4% in developing countries in Asia. East Asia was reportedly the largest host region, accounting for one-third of global FDI in 2020. FDI to transition economies declined by 77% to $13 billion.
In China, where the early phase of the pandemic caused steep drops in capital expenditures, FDI ended the year with a small increase (+4%).
FDI in India reportedly rose by 13%, boosted by investments in the digital sector.
FDI in ASEAN – an engine of FDI growth throughout the last decade – was down 31%.
The halving of FDI inflows to the United States was due to sharp drops in both greenfield investment and cross-border mergers and acquisitions (M&As).
FDI in the EU reportedly fell by two thirds, with major declines in all the largest recipients; flows to the United Kingdom fell to zero.
Although overall FDI flows in developing economies appear relatively resilient, greenfield announcements fell by 46% (-63% in Africa; -51% in Latin America and the Caribbean, and -38% in Asia) and international project finance by 7% (-40% in Africa).
Risks related to the latest wave of the pandemic, the pace of the roll-out of vaccination programs and economic support packages, fragile macroeconomic situations in major emerging markets, and uncertainty about the global policy environment for investment will all continue to affect FDI in 2021.
FDI trend reportedly expected to remain weak in 2021.
