Global foreign direct investment (FDI) flows in the first half of 2020 were down 49% compared to 2019 as lockdowns around the world slowed existing investment projects and the prospects of a deep recession led multination enterprises to re-assess new projects.
The decline cut across all major forms of FDI.
- New greenfield investment project announcements dropped by 37%
- Cross-border mergers and acquisitions (M&As) fell by 15%
- Newly announced cross-border project finance deals, an important source of investment in infrastructure, declined by 25%.
Developed economies saw the biggest fall, with FDI reaching an estimated $98 billion in the first half of 2020, a decline of 75% compared to 2019. The trend was exacerbated by sharply negative inflows in European economies with significant conduit flows. FDI flows to North America fell by 56% to $68 billion.
FDI flows to developing economies decreased by 16% ‒ less than expected. Flows were 28% lower in Africa, 25% in Latin America and the Caribbean and 12% in Asia, mainly due to resilient investment in China. In the first half of 2020, developing Asia accounted for more than half of global FDI. FDI flows to transition economies were down 81% due to a strong decline in the Russian Federation.
Prospects for the full year remain in line with earlier projections of a 30-40% decrease. But the outlook remains highly uncertain, depending on the duration of the health crisis and on the effectiveness of policy interventions to mitigate the economic effects of the pandemic. Geopolitical risks also continue to add to the uncertainty.
