COVID-19 likely to drive down global FDI by 30-40 pct: UNCTAD report

The COVID-19 pandemic may bring a 30-40 percent drop in global foreign direct investment (FDI) flows during 2020 and 2021, according to a report released on Thursday by the United Nations Conference on Trade and Development (UNCTAD).

"COVID-19 is no longer just a global value chain problem," stated the Investment Trend Monitor: Impact of the COVID-19 Pandemic on Global FDI and Global Value Chains.

Although the impact on global FDI has been felt initially through the ripple effects caused by production stoppages and supply chain disruptions in East Asia, and in economies that are closely integrated in global value chains, it is now evident that pandemic mitigation efforts and lockdowns around the world will have devastating effects on all economies, independent of their links to global supply networks, said the report.

On average, 30 percent of reduction in earnings in 2020 was estimated by the top 5,000 multinational enterprises (MNEs), among which those in the energy and basic material industries, airlines and the automotive industry are the hardest hit, according to the report.

The report also noted that MNEs in developed countries averaged higher profit downturn this year at 35 percent, compared to 20 percent in developing economies.

Average downward revisions have been particularly strong in the United States due to the weighting of energy sector MNEs. Downward revisions in Europe have now also exceeded those in Asia.

Among others expecting for the worse, Chinese MNEs currently estimated less severe loss than prospects made in early March, with the downward rate revised from 26 percent to 21 percent. Enditem