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Global FDI flow drops 49% in first half of 2020 due to Covid-19

October 28, 2020
finance & economy

Global foreign direct investment flows dropped 49 per cent annually to $399 billion in the first half of the year and the outlook remains “highly uncertain” due to the economic fallout from Covid-19, a new report by the United National Conference on Trade and Development says.

Movement restrictions due to the pandemic 'slowed existing investment projects and the prospects of a deep recession led multinational enterprises to reassess new projects', Unctad's Global Investment Trend Monitor report released on Tuesday said.

“The FDI decline is more drastic than we expected, particularly in developed economies,” James Zhan, Unctad’s investment and enterprise director, said.

Developed economies saw the biggest fall, with the FDI reaching $98bn in the first six months of the year, a year-on-year decline of 75 per cent.

“The trend was exacerbated by sharply negative inflows in European economies with significant conduit flows … FDI flows to North America fell by 56 per cent to $68bn,” the report said.

“Developing economies weathered the storm relatively better for the first half of the year,” Mr Zhan added, but said the outlook “remains highly uncertain”.

Developing economy FDI dropped 16 per cent to $296bn, which was a better performance than expected due to resilient flows into China, Unctad said.

Flows decreased by just 12 per cent in Asia, 28 per cent in Africa and 25 per cent in Latin America and the Caribbean.

Developing countries in Asia accounted for more than half of global FDI during the period.

Prospects for the full year remain in line with Unctad’s earlier projection of a 30 to 40 per cent decrease in FDI flows.

The rate of decline in developed economies is likely to flatten, as some investment activity appeared to be picking up in the third quarter. Flows to developing economies are expected to stabilise, with East Asia showing signs of an impending recovery.

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