Global FDI halved in first six months of 2020, says UN

Global foreign direct investment (FDI) plunged by 49% in the first half of 2020 compared to the same period last year and is on course to fall by up to 40% for the year, driven by fears of a deep recession, the United Nations has said.

FDI flows to European economies turned negative for the first time ever, falling to -$7 billion from US$202 billion, while flows to the United States fell by 61% to US$51 billion, the UN Conference on Trade and Development (UNCTAD) said in a report.

The report said global FDI fell as multinationals postponed making investments to conserve cash.

“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.

The flows are expected to decline by between 30 and 40% this year and “moderately” in 2021, by between 5 and 10%, Zhan said.

The figures cover cross-border mergers and acquisitions, new greenfield investment projects and project finance deals.

Hardest hit

Industrialised countries, which usually account for roughly 80% of global transactions, were hardest hit, with flows falling to US$98 billion – a level last seen in 1994, the report said.

Among major FDI recipients in 2019, flows declined most strongly in Italy, the United States, Brazil and Australia. China was 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%,” he said.

Most FDI in China was in electronic commerce services, specialised technology services, research and development, Zhan said.

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