UN, crisis of 40% foreign direct investment 2020 with crisis
The Covid-19 crisis will cause a real collapse of foreign direct investment, one of the central aspects of globalization. Unctad’s ‘World Investment Report’ – the United Nations Conference on Trade and Development – predicts an FDI contraction of up to 40% this year compared to the 2019 value of 1,540 billion dollars. International investments made to acquire durable holdings in a foreign company (M&A) or to establish or strengthen a branch abroad (greenfield) would thus fall for the first time since 2005 below the threshold of 1,000 billion. The FDI are then expected to drop by another 5-10% in 2021 and only in 2022 should they start to rise again, always in the best scenario.
The prospects – in fact warns Unctad – are “very uncertain”, as the evolution will depend on the duration of the global crisis and on the effectiveness of the interventions of governments and institutions to mitigate the economic effects of the pandemic. The fall expected for this year is much worse than that recorded due to the financial crisis.
Investment flows to Europe are expected to drop by 30-45% this year, while the decline in North America is expected to be 20-35%. To Africa, a drop of 25-40% is estimated, after the 10% drop to 45 billion in 2019. Asia, in turn, should record a decrease in FDI of 30-45%, after the 5% drop to 474 billion last year. Even worse prospects for Latin America and the Caribbean, with FDI halved, after the 10% increase to 164 billion in 2019. Overall last year, FDI towards developed countries showed a 5% increase to 800 billion and were concentrated in Europe (+ 18% to 429 billion), but due to a rebound to some countries such as Ireland and Switzerland that had recorded important outflows in 2018. The USA, the main beneficiaries of the IDE, mark a decrease of 3% to 246 billion. China ranks second among beneficiaries, rising to 141 billion from 138 billion. Singapore and Holland, Ireland and Brazil follow. Italy is in 16th place, down one position, with Ide entering falling to 27 billion in 2019 from 33 billion in 2018 and is preceded by Mexico and Russia and followed by Cyprus. Germany slips to 11th place from the sixth of 2018 with 36 billion against 74 and France is thirteenth with 34 billion, down from 38. Towards developing countries, the ideas have decreased by 2% to 685 billion.
Japan then remains in first place overall for FDI out of the country with 227 billion, from 133 billion in 2018, ahead of the USA (125 billion against -91 billion), Holland (125 billion against – 19 billion), China (117 bln from 143 bln) and to Germany (99 bln versus 79 bln). The FDI from France fell to 39 billion from 106 billion and those from Italy fell to 25 from 33 billion.