Business & Economy

Foreign investment could return to pre-pandemic levels in 2022: UN

By Antonio Broto

Geneva, Jun 21 (EFE).- Global foreign direct investment, which fell by 35 percent in 2020 due to the Covid-19 pandemic, will grow between 10-15 percent this year, although levels are not expected to recover until at least 2022, a United Nations report said Monday.

The annual World Investment Report compiled by the United Nations Conference on Trade and Development (UNCTAD) slightly reduces the impact of the pandemic on investments (last year it said they had fallen by 42 percent in 2020) and increases its growth forecasts for 2021 by about five points.

Last year, foreign direct investment (FDI) in the world dropped to $1 trillion from $1.5 trillion in 2019, during which the indicator had recovered slightly after three years of decline.

“Global FDI flows are expected to bottom out in 2021 and recover some lost ground with an increase of 10-15 percent,” the report said. “Current forecasts show a further increase in 2022 which, at the upper bound of the projections, could bring FDI back to the 2019 level.”

Investment fell to levels up to 20 percent lower than the worst recorded in the financial crisis more than a decade ago, acting UNCTAD secretary general Isabelle Durant said when presenting the report.

The lockdowns and other containment measures during the pandemic slowed down existing investment projects, while the prospect of a recession prompted multinationals to reassess new projects, the report said.

The drop in foreign investment was more pronounced (58 percent) in developed countries, especially in Europe, where the fall was 80 percent, while in North America it was 40 percent.

In developing economies, the most affected was Latin America, with a 45 percent drop in foreign investment, while in Africa the decline was 16 percent, with Asia the exception in the global trend as there the indicator rose by 4 percent.

Helped by the weaker impact of the pandemic in East Asian countries in 2020, the region became attractive to investors and received half of the world’s investment flows last year, UNCTAD noted.

By country or territory, the United States attracted the most investment in 2020 ($156 billion compared to $261 billion in 2019), and China, in second position, received foreign capital injections worth $149 billion (up from $141 billion in 2019).

In third place was Hong Kong with investments of $119 billion ($74 billion in 2019), and two other Asian economies, Singapore and India, were placed in fourth and fifth with $91 billion and $64 billion (down from $114 billion and up from $51 billion in 2019), respectively.

There was a greater outflow of investment from China, according to UNCTAD ($133 billion, down from $137 billion in 2019), followed by Luxembourg ($127 billion up from $34 billion) and Japan ($116 billion, down from $227 billion).

UNCTAD estimates that this year foreign investment will still be 25 percent lower than in 2019, the year before the pandemic.

Growth prospects in 2021 and 2022 are still surrounded by uncertainty, it said, as they will depend on factors such as possible relapses of the pandemic, the potential impact of state economic recovery plans on investment, and political pressures. EFE


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