Unctad remains optimistic about FDI after global cross-border investment hit pre-Covid levels in 2021 and is now expected to carry some momentum into the new year.
“The outlook for global FDI in 2022 is positive,” Unctad says in its latest Investment Trends Monitor report released on January 19. “The 2021 rebound growth rate is unlikely to be repeated. The underlying trend – net of conduit flows, one-off transactions and intra-firm financial flows – will remain relatively muted, as in 2021. International project finance in infrastructure sectors will continue to provide growth momentum.”
Global FDI jumped to $1.65trn in 2021, from $929bn in 2020, surpassing its pre-Covid-19 level, Unctad figures show.
FDI into developed economies hit $777bn in 2021, which marks a three-fold increase on the record low levels of 2020, according to Unctad. In Europe, more than 80% of the increase in flows was due to large swings in conduit economies. Inflows in the US more than doubled, with the increase entirely accounted for by a surge in cross-border mergers and acquisitions.
FDI into developing economies reached $870bn last year, an increase of 30% from 2020, with a growth acceleration in east and south-east Asia (+20%), a recovery to near pre-pandemic levels in Latin America and the Caribbean, and an uptick in West Asia. Inflows in Africa also rose.
A number of major risks still occupy the minds of foreign investors and will affect the 2022 outlook, Unctad highlights.
“The protracted duration of the health crisis with successive new waves of the pandemic continues to be a major downside risk,” the Investment Trends Monitor report reads. “The pace of vaccinations, especially in developing countries, as well as the speed of implementation of infrastructure investment stimulus, remain important factors of uncertainty. Other important risks, including labour and supply chain bottlenecks, energy prices and inflationary pressures will also affect results.”