Global foreign direct investment collapsed in 2020, falling by 42 per cent to an estimated $859 billion from $1.5 trillion in 2019, according to a report of the UNCTAD.
The FDI finished 2020 more than 30 per cent below the trough after the global financial crisis in 2009 and back at a level last seen in the 1990s,” the 38th Global Investment Trends Monitor published by UNCTAD today reads.
“The decline was concentrated in developed countries, where FDI flows fell by 69 per cent to an estimated $229 billion,” it reads, adding that flows to Europe dried up completely to -4 billion, including large negative flows in several countries. “A sharp decrease was also recorded in the US (-49%) to $134 billion.
The decline in developing economies was relatively measured at -12% to an estimated $616 billion. The share of developing economies in global FDI reached 72 per cent. But China topped the ranking of the largest FDI recipients. FDI in China, where the early phase of the pandemic caused steep drops in capital expenditures, ended the year with a small increase (+4%), whereas FDI in India rose by 13 per cent, boosted by investments in the digital sector. But FDI in ASEAN – an engine of FDI growth throughout the last decade – was down by 31 per cent.
The fall in FDI flows across developing regions was uneven, with -37 per cent in Latin America and the Caribbean, -18 per cent in Africa and -4 per cent in developing countries in Asia. East Asia was the largest host region, accounting for one-third of global FDI in 2020. FDI to transition economies declined by 77 per cent to $13 billion.
Looking ahead, the FDI trend is expected to remain weak in 2021 too. Data on an announcement basis, an indicator of forward trends, provides a mixed picture and point at continued downward pressure:
Sharply lower greenfield project announcements (-35 per cent in 2020) suggest a turnaround in industrial sectors is not yet in sight, the report reads.
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