How has COVID-19 Affected Global FDI Inflows?
Is COVID-19 behind us now?
The answer is a revealing 2-year story about how the pandemic has impacted the global economy, and how it’s currently affecting global Foreign Direct Investments FDIs. However, the story has 2 memorable landmark dates:
- March 11, 2020, when the World Health Organization declared COVID-19 Pandemic
- March 29, 2022
Today, after nearly two years that saw the pandemic wreaking havoc across the world, it’s time to ask what Coronavirus has done to the world economy, and, to put it more specifically: How COVID-19 has affected FDI inflows across the globe.
Fortunately, the United Nations Conference on Trade and Development UNCTAD has recently answered these questions – albeit tentatively.
The Pandemic Impact on FDIs
Let’s dive a little deeper into UNCTAD’s report to take a glance at how COVID-19 has impacted the inflow of global FDIs, and what the FDI situation looked like in 2021 – geographically.
First of all, the good news. The Global FDIs strongly rebounded in 2021, up 77%, to around USD 1.65 trillion, compared to USD 929 billion in 2020, which is higher than the pre-pandemic level.
In the Developing Countries, especially the least developed countries (LDCs), the economies witnessed a relatively modest recovery growth. In the majority of developing countries, recovery in 2021 in development sectors remained fragile. Notably, FDI flows in developing economies increased by 30% to about USD 870 billion, with a recovery to near pre-pandemic levels in Latin America and the Caribbean, remarkable growth acceleration in East and South-East Asia (+20%), and a rise in West Asia.
In the Least Developed Countries (LDCs), the trend in Sustainable Development Goals (SDG)-relevant investment was not great in 2021, with SDG investment project numbers declining by a further 17% in 2021, after the 30% fall in 2020.
In the Developed Countries, on the other hand, the economies witnessed the highest rise, with FDI hitting nearly USD 777 billion in 2021 – three times the extremely low level of 2020. Of the total rise in global FDI flows in 2021 (namely USD 718 billion), over USD 500 billion, or nearly 3 quarters, was recorded in the economies of the developed countries.
FDI in the European Union was up 8%, but flows in the largest economies remained well below pre-pandemic levels.
In the United States – the largest host economy – FDIs increased by 114% to USD 323 billion, with the increase entirely accounted for by a surge in cross-border mergers and acquisitions (M&As).
In Asia, the Association of Southeast Asian Nations (ASEAN) resumed its role as an engine of growth for FDI and globally, with inflows up 35% and increases across most member countries. China witnessed a record USD 179 billion of inflows – a 20% increase – due to a strong services FDI. FDI flows to India were 26% lower, mainly because large M&A deals recorded in 2020 were not repeated, while inflows to Saudi Arabia quadrupled to USD 23 billion, in part due to an increase in cross-border M&As.
In Africa inflows also rose, with inflows to South Africa jumping to USD 41 billion (from $3 billion in 2020).
With this in mind, let’s ask about the expected effect of COVID-19 on FDIs in 2022?
Positive Outlook for 2022
In 2022, the prospects of global FDI look positive, according to the UNCTAD report.
Significantly, the international project finance in the infrastructure sectors will continue to provide growth momentum, according to UNCTAD’s projections.
When it comes to the new investment in manufacturing and global value chains GVCs, it “remains at a low level, partly because the world has been in waves of the COVID-19 pandemic and due to the escalation of geopolitical tensions,” according to James Zhan, director of investment and enterprise at UNCTAD.
What are The 6 Pillars of AIM?
Well, that being the case, what about the second landmark date, mentioned above: March 29, 2022?
It’s when the Annual Investment meeting AIM will be inaugurated in Dubai, the United Arab Emirates.
What is the Annual Investment Meeting AIM?
AIM is the global forum that aims to empower global economies, developed and developing alike, to rebound and drive FDIs to go back to, and exceed, the pre-COVID-19 levels.
An initiative, taken over a decade ago by the United Arab Emirates’ Ministry of Economy, and held under the patronage of His Highness Sheikh Mohammed bin Rashid Al Maktoum, Vice-President and Prime Minister of the United Arab Emirates, Ruler of Dubai, the Annual Investment Meeting (AIM) is a global forum aiming to spur growth in foreign direct investments FDIs worldwide.
The AIM's forthcoming 11th edition — which will be held from 29 to 31 March 2022 with the theme of "Investments in Sustainable Innovation for a Thriving Future" — will focus mainly on a wide array of issues that drive the global economy, including endorsing and boosting investments towards sustainability and innovation through several key activities under the FDI Pillar.
With this 11th edition of AIM aspiring to create a robust roadmap to rebuilding economies by unlocking opportunities, reshaping strategies, and building key partnerships that accelerate global economic progress, and with the event aiming to leverage digital technology, and, at the same time, provide an in-person event for participants who wish to physically interact with fellow participants, it’s the right time for you to …
