Global foreign direct investment (FDI) plunged by 49 percent in the first half of 2020 from the same period a year ago and is on course to fall by up to 40 percent for the year, driven by fears of a deep recession, the United Nations said on Tuesday.

FDI flows to European economies turned negative for the first time ever, falling to -USD 7 billion from USD 202 billion, while flows to the United States fell by 61 percent to USD 51 billion, the UN Conference for Trade and Development (UNCTAD) said in a report.

Global FDI fell as multinationals postponed investments to preserve cash, it said. ”Global FDI flows for the first half of this year went down by close to half… It was more drastic than we expected for the whole year,” James Zhan, director of UNCTAD’s investment and enterprise division, told a news conference.

The flows are expected to decline by 30 to 40 percent this year and ”moderately” in 2021, by 5 to 10 percent, Zhan said. The figures cover cross-border mergers and acquisitions, new greenfield investment projects and project finance deals.

Industrialised countries, which normally account for some 80 percent of global transactions, were hardest hit, with flows falling to USD 98 billion – a level was last seen in 1994, the report said.

Among major FDI recipients in 2019, flows declined most strongly in Italy, the United States, Brazil and Australia. China was bucking the trend, Zhan said. ”Their FDI flows remain relatively stable. For the first half of the year the decline was really modest and in fact according to the latest data, for the first 9 months altogether this year FDI into China increased by 2.5 percent,” he said.

Most FDI investment in China was in electronic commerce services, specialised technology services, and research and development, Zhan said.

First Published:Oct 27, 2020 12:26 PM IST