$852 billion in foreign direct investment flows globally during the first half… a recovery stronger than expected


Global FDI flows in the first half of this year 2021 amounted to about 852 billion dollars, while the increase in the first two quarters led to the recovery of more than 70 percent of the loss caused by the Covid-19 epidemic in 2020. “The numbers are evidence of a stronger recovery momentum expected,” according to the UNCTAD Investment Trends Monitor, released yesterday.
James Zane, director of investment and projects at UNCTAD, told Al-Eqtisadiah that the rapid recovery of foreign direct investment and optimistic expectations mask the increasing disparity in FDI flows between advanced and developing economies, as well as the delay in the widespread recovery of foundation investments in productive capacity. Moreover, “doubts remain many”.
The largest rise in advanced economies
Advanced economies saw the biggest rise, with foreign direct investment reaching an estimated $424 billion during the first half of 2021 — more than three times the exceptionally low level in 2020.
In Europe, although the bulk of growth was caused by sharp setbacks in countries that implemented strict lockdowns, many large economies saw marked increases, on average just 5 percent remaining below the pre-pandemic quarterly levels.
Flows to the US are up 90 per cent, driven entirely by a rise in cross-border mergers and acquisitions.
FDI flows into developing economies also increased significantly, totaling $427 billion in the first half of 2021, with growth accelerating in East and Southeast Asia (+25 percent), and a recovery to levels close to pre-pandemic levels in Central America. and the South, and recovery in many other economies across Africa and West and Central Asia.
Of the total “recovery” in global FDI flows in the first half of 2021 of $373 billion, 75 percent were recorded in advanced economies.
High-income countries more than doubled their quarterly FDI inflows from their 2020 lows, high-income economies saw an increase of 117 percent, middle-income economies saw a 30 percent increase, and low-income economies declined 9 percent.
At the sectoral level, investments decreased by 13 percent in the industrial sector, while they increased by 32 percent in the infrastructure sector.
A mixed picture of investor confidence
The trade arm of the United Nations said the improvement in foreign direct investment activity is reflected in the growing investor confidence in infrastructure, supported by favorable long-term financing conditions, recovery stimulus packages, and overseas investment programmes.
International project finance deals were up 32 percent in number (74 percent by value), with significant increases in most high-income regions and in Asia and South America.
In contrast, investor confidence in the industry and global value chains remains shaken. Greenfield investment announcements – investments in the environment – continued their downward trajectory (-13 percent in number, -11 percent in value over the first three quarters).
The number of new projects in GVC-intensive industries (such as electronics, automobiles, and chemicals) has also decreased, while investment flows in sectors related to the SDGs in developing countries, which previously suffered greatly during the pandemic, are still recovering with a double-digit decline in Almost all sectors, fragile.
The combined value of announced seed investments and project financing deals increased by 60 percent, but mostly because of a small number of very large deals in the energy sector (the total number of investment projects related to SDGs in developing economies continues to decline by 6 percent).
International project finance in renewable energy and utilities continues to be the strongest growth sector. However, the number of investment projects related to sustainable development goals in the least developed countries continues to decline sharply.
Advertisements for new founding projects fell by 51 percent and infrastructure project financing deals by 47 percent. This follows a 28 percent decline in both types in 2020.
The global outlook is better The global outlook for FDI for the full year has improved compared to previous forecasts. The primary trend – net flows – will be more muted than growth rates in the first half of 2021.
However, the current momentum and the growth of international project finance is likely to bring FDI inflows back beyond pre-pandemic levels.
The duration of the health crisis and the frequency of vaccinations, especially in developing countries, as well as the speed of implementation of the infrastructure investment stimulus, remain important factors of uncertainty.
Other important risk factors, including labor and supply chain bottlenecks, energy prices and inflationary pressures, will also influence the final year results.
World Investment Forum
The publication of these figures coincided with the convening of the “Seventh World Investment Forum” organized by UNCTAD online from yesterday to October 22, with the participation of dozens of heads of state and government and more than 40 ministers from developed and developing countries.
More than 100 business executives and global market makers are participating in the conference, including presidents and CEOs of major international companies, the Secretary-General of the International Chamber of Commerce and the CEO of the World Federation of Exchanges.
The conference focuses on investing in a rapid and comprehensive recovery from the Covid-19 crisis and discussing the main challenges facing the global investment and development community resulting from the new industrial revolution, the necessity of sustainability, reorganizing economic governance, efforts for more economic flexibility, and policy measures required to restart the economy. The engine of international production and the restoration of supply chains, and the impact of the Corona virus crisis on investment flows globally, especially in developing countries.
The session discussed investment challenges, which were identified as three: The first challenge is to mobilize more investment, public and private, in sectors of the sustainable development goals such as health, infrastructure and sanitation, especially in poor countries, to make a sustainable impact. By contrast, low-income countries saw a 9 percent drop in FDI inflows during the first half of 2021.
The second challenge is to reorganize global investment governance in the new era of the global economy. Reorganization caused by the increasing fragmentation of international economic policy-making, including systemic competition, and shifts in national economic policy-making from liberalization to regulation and intervention.
The third challenge relates to new technologies and the new industrial revolution, which will have potentially far-reaching consequences for global value chains, with important implications for growth and development.


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