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UNCTAD Report Shows Developed Economies Leading Global FDI Recovery

The 2022 UNCTAD Investment Trends Monitor highlights a discrepancy in FDI recovery between developed and developing nations.

As the world enters 2022, foreign direct investment (FDI) flows are showing a strong recovery from Covid-19. The UN Conference on Trade and Development’s (UNCTAD) Investment Trends Monitor, published on 19 January, reported that FDI flows were up by 77% in 2021 to $1.65trn, having slumped to $929bn in 2020.

Perhaps unsurprisingly, developed countries saw the biggest rebound in FDI with an estimated $777bn in inflows in 2021, three times the 2020 figure.

The US saw FDI inflows double due to cross-border mergers and acquisitions (M&A) almost tripling in value at $285bn. Overall US inflows saw an increase of 114% to $323bn.

In Europe, 80% of inflows were accounted for by conduit economies – economies with tax incentives – with EU inflows up by 8%. However, there is still a way to go until a full recovery can be declared, with the largest economies remaining below pre-Covid levels.

With a 20% increase, China saw record-breaking FDI inflows in 2021 at $179bn, driven by a strong services sector. Brazil is yet to fully recover but did see FDI figures double to $58bn.

Developing economies lag behind

On the less positive side, in developing economies the number of investment projects into sectors related to the UN’s Sustainable Development Goals (SDGs) – such as electricity, food and health – rose by only 11%. However, the overall value of both greenfield and project finance deals increased by 55%, largely due to a handful of high-value investments in the renewables sector.

Overall, investment project numbers for SDG sectors declined by 17% in the least-developed countries, which is particularly concerning given the 30% fall in 2020.

FDI inflows into developing economies did increase by 30% in 2021 compared with 2020’s figures, with East, West and South East Asia, Latin America and the Caribbean overseeing a full recovery from the pandemic when it comes to foreign investment attraction.

The Association of Southeast Asian Nations region saw inflows increase by 35%, with the majority of its members registering impressive growth. However, India could not repeat its impressive M&A figures from 2020, and FDI inflows were 26% lower in 2021 when compared with 2020’s figures.

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