Global FDI to contract by 40pc this year: UNCTAD report

FDI flows this year would stay below $1 trillion for the first time in 15 years.

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GENEVA: Global foreign direct investment (FDI) flows are forecast to decrease by up to 40pc in 2020, and further by 5pc to 10pc in 2021, before recovering in 2022, said a United Nations report Tuesday.

According to the World Investment Report 2020 drawn by the United Nations Conference on Trade and Development (UNCTAD), FDI flows this year would stay below $1 trillion for the first time in 15 years.

Although the impact is severe everywhere, developing economies are projected to see the biggest fall in FDI, said James Zhan, UNCTAD’s director of investment and enterprise, as developing economies rely more on investment in global-value-chain-intensive and extractive industries which have been severely hit, and are unable to carry out the same economic support measures as developed economies.

The report showed that the global FDI flows rose moderately in 2019, 3pc up to $1.54 trillion, after the sizable declines documented in 2017 and 2018.

In 2019, as the impact of the 2017 tax reforms in the United States abated, the FDI flows to developed economies increased 5pc, at $800 billion. Although at a 3pc decline, the US remains the largest recipient of FDI flows, receiving $246 billion.

Despite 5pc decline in FDI flows to developing Asian economies to $474 billion, Asia absorbed more than 30pc of global FDI in 2019.

Facing trade tensions, China still received an all-time high FDI inflow of $141 billion, remaining the second largest FDI recipient.

The report predicted with the global value chain heading toward resilience, capital stock increasing and the global economy regaining, global FDI would experience a gradual U-shape recovery.

UNCTAD Secretary-General Mukhisa Kituyi alerted the outlook of global FDI is highly uncertain, which depends on the duration of the health crisis and the effectiveness of policies mitigating the pandemic’s economic effects.

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