Pandemic halves global FDI: UN report

A United Nations trade report has said that foreign direct investment (FDI) has plunged by 49 percent around the world in the first half of 2020 from the same period a year ago.

FDI is on course to fall by up to 40 percent for the year, driven by fears of a deep recession, the UN has warned.

A report by the UN Conference for Trade and Development (UNCTAD) showed that FDI flows to European economies turned negative for the first time ever, falling to minus $7 billion from $202 billion (€171 billion). Foreign direct investment flows to the United States dropped by 61 percent to $51 billion.

“Global FDI flows for the first half of this year went down by close to half... It was more drastic than we expected for the whole year,” said James Zhan, director of UNCTAD’s investment and enterprise division. He added that the flows are expected to decline by 30 to 40 percent this year and “moderately” in 2021, by five to ten percent. The figures cover crossborder mergers and acquisitions, new greenfield investment projects and project finance deals.

According to the report, industrialized countries, which normally account for some 80 percent of global transactions, were hardest hit, with flows falling to $98 billion a level last seen in 1994.

Among major FDI recipients in 2019, flows declined most strongly in

Italy, the United States, Brazil and Australia.

China is bucking the trend, Zhan said. “Their FDI flows remain relatively stable. For the first half of the year the decline was really modest and in fact according to the latest data, for the first nine months altogether this year FDI into China increased by 2.5 percent,” he said.

Most FDI investment in China was in electronic commerce services, specialized technology services, and research and development, Zhan noted.