2021 FDI flows likely to bottom out, flows to Asia resilient: UNCTAD

02 Jul '21

2 min read

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Global foreign direct investment (FDI) flows are expected to bottom out in 2021 and recover some lost ground with an increase of 10–15 per cent, according to the World Investment Report 2021 by the United Nations Conference on Trade and Development (UNCTAD), which recently said this would still leave FDI some 25 per cent below the 2019 level and more than 40 per cent below the recent peak in 2016.

Current forecasts show a further increase in 2022 which, at the upper bound of the projections, could bring FDI back to the 2019 level of $1.5 trillion, it said.

FDI inflows to Asia will remain resilient (8 per cent); the region has stood out as an attractive destination for international investment throughout the pandemic.

A substantial recovery of FDI to Africa and to Latin America and the Caribbean is unlikely in the near term. These regions have more structural weaknesses, less fiscal space and greater reliance on greenfield investment, which is expected to remain at a low level in 2021.

The relatively modest recovery in global FDI projected for 2021 reflects lingering uncertainty about access to vaccines, the emergence of virus mutations and delays in the reopening of economic sectors.

Increased expenditures on both fixed assets and intangibles will not translate directly into a rapid FDI rebound, as confirmed by the sharp contrast between rosy forecasts for capital expenditures and still depressed forecasts for greenfield project announcements, the report said.

The FDI recovery will be uneven. Developed economies are expected to drive global growth in FDI, with 2021 growth projected at 15 per cent (from a baseline excluding conduit flows), both because of strong cross-border merger and acquisitions (M&As) and large-scale public investment support.

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