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UNCTAD figures show 42% drop for FDI in 2020

UNCTAD report makes clear the impact of Covid-19 on FDI, with levels plummeting by a greater than expected amount in 2020.

Covid-unctad-fdi
The Covid-19 pandemic has caused lockdowns and closures all over the world, which has had a dramatic impact on FDI levels, according to the latest UNCTAD report. (Photo by Lee Hulsman/Getty Images)

The latest figures published in the Global Investment Trends Monitor from the UN Conference on Trade and Development (UNCTAD) show that foreign direct investment (FDI) plummeted in 2020, falling 42% to an estimated $859bn, from $1.5trn in 2019. UNCTAD previously estimated a decline of 30–40% for the year.

Greenfield investments were the hardest hit, declining 35%, while cross-border mergers and acquisitions (M&A) declined 10% and new international project finance deals fell by 2%.


Greenfield FDI was severely affected in developing economies (-46%) and transition economies (-60%).

Values of announced greenfield FDI projects fell 44% in manufacturing industries and 26% in service industries. The information and communications sector witnessed an 18% rise in project values to $78bn, however, despite declining project numbers. As the largest sector globally, it accounted for more than one-fifth of FDI in 2020.

Cross-border M&A sales increased in Europe (26%) and Asia (31%); however, declines were witnessed across North America (-43%), Latin America and the Caribbean (-67%), and Africa (-45%).

FDI in developed countries takes a battering

FDI in developed countries was heavily impacted by Covid-19 in 2020, with flows falling 69% to an estimated $229bn following significant declines in Europe and North America of more than 100% and 46%, respectively. The estimated inflows into developed economies totalled only one-third of the low point witnessed after the 2009 financial crisis.

Despite a 12% decline in FDI flows in developing economies to $616bn, they accounted for 72% of global FDI, their highest percentage on record. However, the changes in FDI flows across developing regions were unbalanced, with declines of 37% in Latin America and the Caribbean, 18% in Africa and 4% in developing Asia. East Asia was the largest host region, accounting for one-third of global FDI in 2020, following growth of 12%.

Highlighting the resilience of its economy, China displaced the US as the top FDI destination in 2020, with the country witnessing a 4% increase in FDI, compared with a 49% decline in the US. China attracted an estimated $163bn in FDI compared with $134bn in the US.

Elsewhere, FDI in India increased 13% following investments in the digital sector. In contrast, the UK and Italy both suffered FDI flow declines of more than 100%, with Russia closely behind with a 96% drop.

UNCTAD expects this weak FDI performance to continue in 2021. Economic recovery will not be uniform across the globe and investors are likely to remain hesitant. Economic support packages will continue to be key in helping economies bounce back, alongside the the roll-out of vaccination programmes.

Christine Patton

Christine Patton

Senior economist

Christine Patton is senior economist for New Statesman Media Group.