The latest United Nations Conference on Trade and Development (UNCTAD) assessment is warning that the coronavirus pandemic is set to cause a dramatic drop in global foreign direct investment, driving it down by 30%-40% in 2020.
UNCTAD was commenting in a newly-published special issue of its Global Investment Trends Monitor looking at the potential impact of the Coronavirus pandemic on foreign direct investment (FDI) and global value-chains (GVCs).
UNCTAD said the impact scenarios for the pandemic are evolving day-by-day in response to the rapid spread of the virus. The organisation is now projecting the downward pressure on global FDI to be in the range of -30% to -40% leading up to 2021.
The top 5,000 multinationals, which account for a significant share of global FDI, now forecast downward revisions of their 2020 earnings estimates of -30% on average, with peaks of -200% in the most affected industries, a trend which is likely to deteriorate further, UNCTAD said.
The pandemic coupled with the necessary mitigation measures and lockdowns is affecting all components of FDI.
Capital expenditures, greenfield investments and expansions are all on hold due to the physical closure of sites and production slowdowns. New M&A announcements are on course to drop by -70% globally in Q1.
According to UNCTAD, initially, a “time-limited global supply chain shock” from Covid-19 appeared to be the main factor affecting FDI prospects. This has now been overtaken by the expectation of a global recession, which could extend the shock on GVCs and prolong the vulnerabilities of local suppliers and small businesses worldwide.
An in-depth analysis of FDI trends will feature in the forthcoming World Investment Report 2020, published in June.
Click here to read the special issue of the Global Trends Investment Monitor
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