Global foreign direct investment (FDI) is expected to follow a downward trajectory in 2022, as the world faces a weaker macroeconomic environment and a combination of crises exacerbated by the ongoing war in Ukraine, according to Unctad’s World Investment Report 2022.

James Zhan, Unctad’s director of investment and enterprise, says that prospects for global FDI are “gloomy” amid a multitude of crises in fuel, food and finance, as well as the ongoing global health crisis and humanitarian crisis caused by the war in Ukrainian.


“These multiple crises create myriad investment risks,” he tells fDi, adding that macroeconomic indicators are all “moving downward drastically”. These include lower growth in gross domestic product, trade and capital formation, along with higher levels of debt and inflation. 

Preliminary fDi Markets data shows that global greenfield FDI projects were down by about 13% in the first quarter of 2022, compared to the same period of 2021. 

Unctad notes that an additional factor weighing on the 2022 global FDI outlook is the outbreak of Covid-19 in China, where there continues to be lockdowns in areas which are crucial to global value chain-intensive industries. fDi Markets data indicates that China recorded its lowest first-quarter on record for greenfield FDI in 2022.

Mr Zhan added that the majority of the world’s 1000 largest multinationals have downgraded their 2022 earnings forecasts, compared with before the Ukraine war. He continued that this is particularly notable among companies reliant on fossil fuels and primary commodity inputs — prices which have skyrocketed in recent months.

Strong 2021

The gloomy outlook for FDI this year comes off the back of a strong rebound in 2021. Global FDI flows rose to $1.58tn, up by 64% from an exceptionally low year in 2020, according to Unctad data. The reinvested earnings component of FDI — profits retained in foreign affiliates by multinational companies — accounted for the majority of global growth. Unctad said this reflected the record increase in corporate profits, especially in developed economies.

Mr Zhan says this “V-shaped recovery” in global FDI was witnessed in almost all global regions, but diverges significantly at the sub-regional level. 

In developed countries, FDI inflows in 2021 reached $746bn in 2021, more than double that of 2020. Meanwhile, FDI flows to developing economies rose by 30% to $837bn, amid a strong recovery in Asia.

One of the main drivers for the increase in overall FDI flows was the booming mergers and acquisitions (M&A) market. Cross-border M&A was up by 43% in 2021, according to Unctad data, while greenfield projects rose by just 11% and remained below their pre-pandemic levels.

Mr Zhan says that the M&A boom was due to massive corporate restructuring related to supply chain resilience and risk reprofiling. This was evident in the US, where overall FDI inflows more than doubled to $367bn due to a surge in cross-border M&A.

fDi Markets data indicates that the US saw a record number of announced mega-projects — investments involving at least $1bn of capital expenditure — which is expected to continue over the next five years.