Global FDI flows shrink 49% in H1-20 amid COVID-19

Global foreign direct investment (FDI) flows plunged by 49% during the first half (H1) of 2020, when compared to 2019, according to the United Nations Conference on Trade and Development (UNCTAD).

In its report 'Investment Trends Monitor', UNCTAD expected that the global FDI flows would cut by up to 40% for the full year.

UNCTAD referred that lower FDI flows are attributed to the coronavirus (COVID-19) lockdowns which negatively affected existing investment projects across the world.

Moreover, the prospects of deep recessions have pushed multinational enterprises (MNEs) to delay new projects.

The fall was seen across major FDIs, including new greenfield investments with a 37% drop, cross-border mergers and acquisitions with 15%, and newly announced cross-border finance deals with 25%.

Developed economies, namely Europe with significant conduit flows and the US, witnessed the biggest decline, as the value of FDI flows retreated by 75% to $98 billion in H1-20, when compared to 2019.

FDI flows to European economies turned negative for the first time ever, dropping to -$7 billion in H1-20 from $202 billion in 2019, while flows to the US shrank by 61% to $51 billion,

As for the developing countries, the FDI flows lowered by 16% during the January-June period of 2020, which is less than expected.

Meanwhile, FDI flows to transition economies decreased by 81%, driven by a strong decline in the Russian Federation.

"The outlook remains highly uncertain, depending on the duration of the health crisis and on the effectiveness of policy interventions to mitigate the economic effects of the pandemic. Geopolitical risks also continue to add to the uncertainty," the report concluded.