According to the Organization for Economic Cooperation and Development, global foreign direct investment flows fell to their lowest level in 15 years in 2020 when the Covid-19 pandemic hit the global economy.
The Paris-based organization said in a report that global foreign direct investment fell 38 percent from the previous year to $ 846 billion.
This represents just 1% of global GDP, the lowest level since 1999.
“This decrease represents the lowest level of stock flows in the OECD countries since 2005, mainly due to large divestments from Switzerland and the Netherlands, for example sales of current shares in companies in these two countries by foreign parent companies and a significant decrease in flows. Foreign direct investment to the United States and other OECD countries.
The OECD economies contracted by 4.9 percent in 2020, the biggest decline since 1962, when GDP fell to 0.7 percent in the fourth quarter.
Almost all of the Organization for Economic Cooperation and Development (OECD) countries saw production contractions last year, ranging from 3.5% in the US to 9.9% in the UK.
The report said that China, one of the few major economies to grow last year, overtook the United States as a major destination for foreign direct investment after shutting down large swaths of the world’s largest economy as a result of the epidemic.
China and the United States received inflows of $ 212 billion and $ 177 billion in foreign direct investment, respectively. Aside from resident special purpose entities, India and Luxembourg were the second largest recipients.
According to the report, Luxembourg, the United States and Japan were the largest sources of FDI outflows.
The United States has remained broadly stable last year, while outflows of foreign direct investment from Japan and China have decreased.
The Organization for Economic Cooperation and Development expects a rebound in cross-border mergers and acquisitions – which began in the second half of last year and continued in advanced economies in the first quarter of this year – to help stem the direct influx of foreigners. Investment this year.
The report stated that “many companies have moved into international dealings, driven by lower financing costs, an expected decline in purchase prices, and brighter expectations with the availability of the vaccine.”
She said that this could boost the inflows of foreign direct investment this year unless large divestments continue, which had a strong impact on the net inflows of foreign direct investment last year.
According to the report, the values of cross-border mergers and acquisitions in the past year were driven by some of the big deals in specific sectors. More deals were struck in the healthcare and technology sectors than in previous years.
She added that foreign direct investment flows into the OECD region fell by 51 percent last year, in part due to large withdrawals of investment from Switzerland and the Netherlands.
Outflow from the OECD region decreased by 48 percent compared to 2005 as a result of large liquidations by companies in the Netherlands.
FDI flows to non-OECD economies fell by 9 percent as a result of the recovery in China and India later this year. The data showed that outflows of foreign direct investment through some of the G20 economies that are not members of the Organization for Economic Cooperation and Development decreased by 49 percent.
The Organization for Economic Cooperation and Development said last month that the socio-economic disruption caused by the pandemic had given governments an opportunity to rethink policies and move their countries on a more sustainable and inclusive path.
The Global Policy Forum, which works with 100 countries around the world, said leaders can now address challenges such as income equality and regional economic divisions, deliver a strong recovery and promote high-quality growth.
The International Monetary Fund raised its global economic forecast for a second time thanks to rapid Covid-19 vaccination campaigns and financial and monetary support from governments and central banks.
However, policymakers warned of widening income inequality and a disproportionate recovery as rich countries recover faster from the pandemic.
The lender in Washington said in its latest World Economic Outlook report in April that the global economy is now poised to expand by 6 percent this year, more than the previous forecast of 5.5 percent.