Foreign direct investment in 2021 – a nascent recovery?

UNCTAD World Investment Report 2022 came out recently. On fig. Figure 1 shows the recovery of FDI inflows.

While flows have rebounded, they have not reached pre-Trump trade war levels. In the previous mail, Jardet, Jude, and I attribute the downturn (until 2020) to trade war-related uncertainty. Figure 2 shows how inflows have recovered in 2021.

Looking ahead, the Report notes:

This fragile growth in real productive investment is likely to continue into 2022. The effects of the war in Ukraine with the triple food, fuel and financial crisis, as well as the ongoing COVID-19 pandemic and climate disruption, are exacerbating stress, especially in developing countries. countries. Global growth estimates for the year are already understated by a full percentage point. There is a significant risk of a premature end to the momentum for a recovery in international investment, hindering efforts to increase financing for sustainable development.

In our paperCaroline Jardet, Christina Jude, and I concluded that FDI inflows respond to economic uncertainty, so it would indeed be difficult under these conditions to sustain flows at elevated levels (mail).

Here are the OECD estimates of FDI inflows in the first quarter and the GDP-weighted global uncertainty index (used in Jarde, Jude, Chinn (2022)).

Figure 1: World FDI flows, USD billion. Source:OECD.

Figure 2: WUI weighted by GDP. Source:worlduncertainty.com.