UNCTAD’s assessment of Covid-19 impact on global FDI prospects

09 Mar 2020

The Special Issue of UNCTAD’s Global Investment Trends Monitor highlights the potential impact of the Coronavirus outbreak on FDI in 2020 (download).

Depending on the scenario for the spread of the epidemic, the downward pressure on FDI caused by Covid-19 is expected to be -5% to -15% (compared to previous forecasts projecting marginal growth in the underlying FDI trend for 2020-2021).

The impact on FDI will be concentrated in those countries that are most severely hit by the epidemic, although negative demand shocks and the economic impact of supply chain disruptions will affect investment prospects in other countries.

Many multinational enterprises (MNEs) in UNCTAD’s Top 100, a bellwether of overall investment trends, are slowing down capital expenditures in affected areas. In addition, lower profits – to date, 41 have issued profit alerts – will translate into lower reinvested earnings (a major component of FDI).

On average, the top 5000 MNEs, which account for a significant share of global FDI, have seen downward revisions of 2020 earnings estimates of 9% due to Covid-19. Hardest hit are the automotive industry (-44%), airlines (-42%) and energy and basic materials industries (-13%). Profits of MNEs based in emerging economies are more at risk than those of developed country MNEs: developing country MNE profit guidance has been revised downwards by 16%.

For the latest issue of the Global Investment Trends Monitor and the UNCTAD Investment Policy Monitor, please click here. An in-depth analysis of FDI trends will feature in the forthcoming World Investment Report 2020, to be published in June 2020.