NEW YORK
Global foreign direct investment (FDI) surged 77 percent year-on-year to an estimated $1.65 trillion in 2021, exceeding pre-pandemic levels, the UN Conference on Trade and Development (Unctad) said.
The rise in FDI flows last year was driven by higher infrastructure financing due to economic stimulus packages but recovery remains uneven, while the outlook for flows this year is positive, the Unctad said in its latest Investment Trends Monitor report.
According to the report, developed economies recorded the biggest FDI flows last year, which tripled to $777 billion from a year ago, while inflows to developing countries rose 30 percent to $870bn. By comparison, least-developed economies recorded a modest FDI increase of 19 percent to $28bn in 2021.
FDI into the US, the world’s biggest economy and the largest recipient of investments, more than doubled to $323bn as cross-border mergers and acquisitions surged. Flows to the EU rose 8 percent to $165bn but remained well below pre-pandemic levels in the bloc’s largest economies.
China, the world’s second-biggest economy, recorded $179bn of inflows – a 20 percent increase – driven by strong investment in the services sector. Inflows to Saudi Arabia, the Arab world’s biggest economy, quadrupled to $23bn, in part due to an increase in cross-border mergers and acquisitions, Unctad said.
However, inflows to India were 26 percent lower, mainly because large M&A deals recorded in 2020 were not repeated, the UN agency said.
In terms of sectors, investor confidence in infrastructure was strong, supported by favourable long-term financing conditions, recovery stimulus packages and overseas investment programmes. The number of international project finance deals rose 53 percent, while transaction value increased 91 percent, with sizeable increases in most high-income regions, Asia, Latin America and the Caribbean, Unctad said.
By contrast, investor confidence in industry and global value chains was weak. Greenfield investment project deals were flat, declining 1 per cent in the number of transactions and up 7 per cent in value. The number of new projects in global value chains and intensive industries such as electronics fell further.
In industrial sectors, greenfield investment activity was 30 percent below pre-pandemic levels. Only the information and communication sector has fully recovered.
However, the recovery of investment flows to sectors relevant to the UN’s SDGs in developing economies, which suffered significantly during the pandemic with double-digit declines across almost all sectors, remains fragile.
