FDI increase in first half of 2021 recovers more than 70% of loss caused by pandemic last year
Global foreign direct investment (FDI) flows recovered in the first half of 2021 to reach $852 billion, according to a UN report released Tuesday.
The figure surged 78% this January-June compared to the same period last year which saw a 70% decrease due to the virus, according to the UN Conference on Trade and Development (UNCTAD).
Developed economies saw the biggest increase in FDI, which rose to an estimated $424 billion in January-June – more than three times the level during the pandemic in 2020.
In Europe, several large economies saw sizeable increases in FDI, remaining only 5% below pre-pandemic quarterly levels on average. FDI flows in the US were up by 90%, driven by a surge in cross-border mergers and acquisitions, according to the report by UNCTAD’s Investment Trends Monitor.
FDI flows in developing economies also increased significantly to total $427 billion in the first six months of 2021, with a 25% growth in East and South-East Asia, a recovery to near pre-pandemic levels in Central and South America,and some upticks across Africa, and West and Central Asia, it said.
In the first half of 2021, compared to 2020 on a quarterly basis, high-income countries more than doubled their FDI inflows with a 117% jump, and middle-income economies saw a 30% increase, while low-income economies recorded a 9% decline.
As for sectors, infrastructure recorded a 32% rise during that period, however greenfield investment project announcements had a 13% decline.
“The rapid FDI recovery and the optimistic outlook mask the growing divergence in FDI flows between developed and developing economies, as well as the lag in a broad-based recovery of the greenfield investment in productive capacity,” James Zhan, UNCTAD’s director of investment and enterprise, said in a statement.
Zhan, however, stressed that uncertainties remain abundant for the future.
Some of the factors that create uncertainty and risks include duration of the pandemic, vaccinations in developing countries, pace of implementing infrastructure investments, labor shortages, supply chain bottlenecks, energy prices, and inflationary pressures, according to UNCTAD.