The economic crisis that resulted from the Covid-19 pandemic has had a major impact on foreign direct investments with long-term effects, says the United Nations Conference on Trade and Development (UNCTAD) Global Investment Report 2020.
By 2020, global foreign direct investments (FDI) flows are expected to decline by up to 40%, bringing them below $1 trillion for the first time since 2005. A fall that is expected to continue in 2021, with a further reduction of 5 to 10%, the authors estimate. They also predict that the EU will particularly feel the impact, with an estimated 30-45% reduction in FDI.
The shock is not only on the supply side, it is also reflected in the demand for FDI, the report points out. Similarly, public policies on investment have been affected by the crisis. Many entities have put in place increasingly restrictive policies regarding FDI, the authors note, in particular to filter these investments and thus protect sectors considered strategic - as in the case of the EU (see EUROPE 12495/16). These effects on investment policies can be sustained over time, on the one hand by accentuating the transition to more restrictive FDI authorisation policies, and on the other by triggering increased competition for investment.
“The crisis comes on top of existing challenges to the system resulting from the new industrial revolution, growing economic nationalism and the imperative of sustainability”, the authors note. “These challenges were already reaching an inflection point; the pandemic looks set to tip the scales”, UNCTAD says
See the overview of the report: https://bit.ly/3d5UO7a (Original version in French by Hermine Donceel)