Despite the lingering disruptions caused by the COVID-19 pandemic to global economies, total foreign direct investment (DFI) globally amounted to about $852 billion in the first half of 2021, reflecting a stronger than expected rebound in most economies.
The United Nations Conference on Trade and Development (UNCTAD) in its latest Investment Trends Monitor published Tuesday indicated that the figures showed an increase in the first two quarters of the year, recovering more than 70 percent of the losses stemming from the COVID-19 crisis last year.
Commenting on the latest FDI figures, UNCTAD’s director of investment and enterprise, James Zhan, said the surge “masks 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.”
Despite the positive FDI trend, the trade expert cautioned that there remained uncertainties in the global trade space.
The UNCTAD listed some factors that make the clime uncertain as including the COVID-19 pandemic duration, the pace of vaccinations, especially in developing countries, and the speed of implementation of infrastructure stimulus, labour and supply chain bottlenecks, rising energy prices, and inflationary pressures.
The further stated that despite these challenges, the global outlook for the full year had improved from with the growth in the next few months projected to be likely more muted than in the first half of the year.
The UNCTAD, in the latest Investment Trends Monitor, projected the current economic situation should still take FDI flows to beyond pre-pandemic levels.
An analysis of the latest report reflected that developed economies had the highest FDI flows in the half year under review, reaching an estimated $424 billion, more than three times the exceptionally low level in the corresponding period of last year
For instance, in Europe most of the large economies attracted huge growth in FDI, on the average remaining only five per cent below pre-pandemic quarterly levels.
Also, inflows in the United States rose by 90 percent, largely driven by a surge in cross-border mergers and acquisitions.
Similarly, FDI flows in developing economies also significantly increased to $427 billion by half year.
The UNCTAD further reported that in East and Southeast Asia, FDI flows grew by 25 percent from January to June this year, a recovery level that is near pre-pandemic levels in Central and South America, and significant improvements in several other regional economies across Africa and West and Central Asia.
According to the report, of the total recovery increase, 75 percent was recorded in developed economies while high-income countries more than doubled quarterly FDI inflows from the very low 2020 levels, middle-income economies witnessed a 30 percent increase, and low-income economies suffering a further nine percent decline during the half year under review
The UNCTAD noted that growing investor confidence was most visible in infrastructure, stimulated by favourable long-term financing conditions, recovery stimulus packages and overseas investment programmes.
Similarly, it reported that international project finance deals also rose by 32 percent in number and 74 percent in value terms, with most of the increases recorded in most high-income regions, Asia and South America.
However, UNCTAD further reported that investor confidence in industry and value chains remained uncertain just as Greenfield investment project announcements continued to slide, decreasing 13 percent in number and 11 percent in value until the end of September.
The latest Investment Trends Monitor further stated that after suffering double-digit declines across almost all sectors, the recovery in Sustainable Development Goals (SDGs areas in developing countries remained fragile.
The publication disclosed that the combined value of announced Greenfield investments and project finance deals rose by 60 percent, but mostly due to a small number of very large deals in the power sector while international project finance in renewable energy and utilities continued to be the strongest growth sector.
The UNCTAD reported that investment in projects relevant to the SDGs in the least developed countries continued to decline just as new Greenfield project announcements fell by 51 percent and infrastructure project finance deals by 47 percent in half year 2021.
