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Global foreign direct investment down 42 percent last year, says UNCTAD report

Global Foreign Direct Investment Down 42 Percent Last Year: UNCTAD Report

GENEVA – Global foreign direct investment collapsed in 2020, falling 42% to around $859 billion from US $1.5 trillion in 2019, according to UNCTAD’s 38th Global Investment Trends Monitor released on January 24.
Foreign Direct Investment (FDI) is believed to have ended last year more than 30% below the trough of the global financial crisis in 2009 and at a level last seen in the 1990s.
The decline was concentrated in developed countries, where FDI inflows fell 69% to around $229 billion. Flows to Europe dried up completely to reach -4 billion, including significant negative flows in several countries.
A sharp drop was also recorded in the United States (-49%) to 134 billion dollars.
The decline in developing economies has been relatively measured at -12% for an estimated $616 billion, according to the report.
The share of developing economies in global FDI is estimated to have reached 72% – the highest share on record. China tops the ranking of the largest recipients of FDI.
The decline in FDI flows between developing regions has been uneven, with -37% in Latin America and the Caribbean, -18% in Africa and -4% in developing countries in Asia.
East Asia would have been the largest host region, accounting for a third of global FDI in 2020. FDI to transition economies fell 77% to $13 billion.
In China, where the early phase of the pandemic caused sharp declines in investment spending, FDI ended the year with a slight increase (+ 4%).
FDI in India is said to have increased by 13%, stimulated by investments in the digital sector.
FDI in ASEAN – the engine of FDI growth over the past decade fell by -31%.
The halving of FDI inflows to the United States was due to the sharp decline in investment in new factories and cross-border mergers and acquisitions.
FDI in the EU is said to have fallen by two thirds, with significant declines among all the main recipients; flows to the UK have fallen to zero.
Although overall FDI flows to developing economies appear relatively resilient, announcements of new projects fell by 46% (-63% in Africa; -51% in Latin America and the Caribbean and -38% in Asia ) and the financing of international projects by 7% (- 40% in Africa).
The risks associated with the latest wave of the pandemic, the pace of roll-out of immunization programs and economic support programs, the fragile macroeconomic situations in key emerging markets and the uncertainty over the global policy environment for investment will continue all to affect FDI in 2021.
The FDI trend is expected to remain weak in 2021.

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