As per the World Investment Report 2021 by the United Nations, UNCTAD, the FDI prospects for 2020-2021 appear to be bleak.
The COVID-19 pandemic is likely to cause a drastic fall in global FDI. Reported under Figure 1 below, we find that global FDI flows are forecasted to fall by 40 % in 2020 as compared to 2019 where the global FDI value was $1.54 trillion. The world will experience an FDI below $1 trillion for the first time since 2005. As for 2021, the Global FDI is expected to decrease by a further 5-10% and gain a slow recovery in 2022. There is a possibility that a rebound with FDI reverting to pre-COVID underlying trend happens, however that would only be at the upper bound of expectations.
The outlook is extremely uncertain and therefore will depend on the duration of the COVID-19 crisis and on the effectiveness of policy interventions to mitigate economic effects post the pandemic. The uncertainty is also heightened by geopolitical and financial risks as well as continuing trade tensions.
“The projected fall is significantly worse than the one experienced in the years following the global financial crisis. At their lowest level ($1.2 trillion) then, in 2009, global FDI flows were some $300 billion higher than the bottom of the 2020 forecast.” – World Investment Report 2020, UNCTAD
Indeed, it can be said that the downturn following the COVID-19 pandemic will lead to several years of negative or stagnant growth. As such it compounds a longer-term declining trend. As per the report, the expected global FDI flows in 2021 would represent a 6% decline since the year 2015, from $2trillion to less than $900 billion.