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Economies lose over $700b to COVID-19

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REUTERS/Temilade Adelaja

Investment inflows to remain weak in 2021
The global economy lost over $700 billion in foreign direct investment (FDI) in 2020, tumbling from $1.5 trillion in 2019 to $859 billion in the period under review.

The United Nations Conference on Trade and Development (UNCTAD), in its 38th Global Investment Trends Monitor Report, attributed the development to the harsh effects of the COVID-19 pandemic.

The document, which measures levels of FDI across the world, pointed out that investments fell by about 42 per cent.

The drop in developing economies stood at about -12 per cent, bringing estimated investments to $616 billion, while the decline was high in developed countries, where FDI flows dipped by 69 per cent to an estimated $229 billion.

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“Flows to Europe dried up completely to -4 billion, including large negative flows in several countries. A sharp decrease was also recorded in the United States (-49 per cent) to $134 billion,” the report noted.

The global agency said the FDI share of developing economies climaxed at 72per cent. China, on the other hand, topped the list of the largest recipients.

According to the data, the fall in FDI flows across developing regions was uneven, with -37per cent in Latin America and the Caribbean; -18per cent in Africa and -4per cent in Asia.

East Asia was largest host region, accounting for one-third of global FDI in 2020, while those to transition economies declined by 77per cent to $13 billion.

The document added: “FDI in China, where the early phase of the pandemic caused steep drops in capital expenditure, ended the year with a small increase (+4per cent). FDI in India rose by 13 per cent, boosted by investments in the digital sector. FDI in ASEAN – an engine of FDI growth throughout the last decade – was down by 31per cent.

“The halving of FDI inflows to the United States was due to sharp drops in both greenfield investment and cross-border mergers and acquisitions (M&As). FDI in the European Union (EU) fell by two thirds, with major declines in all the largest recipients. Flows to the United Kingdom fell to zero. FDI trend expected to remain weak in 2021.”

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