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Retail Global Foreign Direct Investment Plunges Due to COVID

James Fallon and John Zarocostas
·2 min read

GENEVA — Heavily impacted by the pandemic-inflicted economic meltdown that has sapped confidence and demand, global foreign direct investment collapsed in 2020, falling by an estimated $859 billion, from $1.5 trillion in 2019, a United Nations report said.

The FDI flows — the lowest level since the 1990s — also triggered a sharp drop in new FDI destined for the world’s retail/apparel sector, with outlays estimated at $7.2 billion, down by more than 50 percent from $15.1 billion registered in 2019, said U.N. analysts. They noted new greenfield investment flows in the top host country, the U.S., fell to only $3.2 billion from $6.3 billion.

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Similarly, declared greenfield FDI projects earmarked for the retail/apparel sector in the U.K. declined to $624 million from $1.5 billion the year before, and also posted steep falls in France, to $193 million from $618 million; Italy with $112 million ($225 million), and Germany with $100 million ($238 million).

New FDI investments in the retail/apparel sector were also down in the neighboring countries of Canada to $352 million ($807million); and in Mexico to $40 million ($281 million).

Greenfield investments in apparel retail were also sharply down in emerging markets such as in Russia to $71 million ($187 million); United Arab Emirates to $71 million ($160 million); India to $37 million ($88 million), and Hong Kong to $32 million ($122 million).

However, greenfield FDI investments in the world’s most dynamic emerging retail apparel market, China, posted a smaller decline to $464 million from $580 million, reflecting the rebound of the world’s biggest emerging economy after its early lockdown.

Overall, China’s total FDI flows rose by 4 percent to $163 billion, a record level, making the country the largest recipient in 2020, surpassing the U.S. as the top destination. FDI to the U.S. fell by 49 percent to $134 billion, in 2020.

Looking ahead, the U.N. report predicts FDI flows will remain weak in 2021, forecasting they will fall by a further 5 to 10 percent.

“The decline of global FDI will bottom out in 2021, and a real recovery will start in 2022,” said James Zhan, director for investment and enterprise and enterprise, at the U.N. Conference on Trade and Development, and lead author of the “Global Investment Trends and Prospects: 2020-2021” report.

“Risks related to the latest wave of the pandemic, the pace of the roll-out of vaccination programs and economic support packages, fragile economic situations in major emerging markets, and uncertainty about the global policy environment will continue to affect FDI in 2021,” Zhan said.