Global foreign direct investment falls 49%, outlook remains negative

Global foreign direct investment (FDI) flows fell 49 percent in the first half of 2020 compared to 2019, due to the economic fallout from Covid-19, reveals the latest Global Investment Trends Monitor released today by United Nations Conference on Trade and Development (UNCTAD).

In the wake of the pandemic, lockdowns around the world slowed existing investment projects and the prospects of a deep recession led multinational enterprises to reassess new projects.

"The FDI decline is more drastic than we expected, particularly in developed economies. Developing economies weathered the storm relatively better for the first half of the year," said James Zhan, UNCTAD's investment and enterprise director. "The outlook remains highly uncertain," he added.

According to the report, developed economies saw the biggest fall, with FDI reaching an estimated 98 billion US dollars in the six-month period -- a decline of 75 percent compared to 2019.

The trend was exacerbated by sharply negative inflows in European economies, mainly in the Netherlands and Switzerland. FDI flows to North America fell by 56 percent to $68 billion.

Meanwhile, the 16 percent decrease in FDI flows to developing economies was less than expected, due mainly to resilient investment in China. Flows decreased by just 12 percent in Asia but were 28 percent lower than in 2019 in Africa and 25 percent lower in Latin America and the Caribbean.

In the six months to June 2020, developing countries in Asia accounted for more than half of global FDI. Flows to economies in transition were down 81 percent due to a strong decline in the Russian Federation.    

The decline cut across all major forms of FDI, the report shows.