Report

Value Assessment Report 2020

INVESTMENT TRENDS AND PROSPECTS  
 
The COVID-19 crisis will cause a dramatic fall in FDI.
 
Global FDI flows are forecast to decrease by up to 40 per cent in 2020, from their 2019 value of $1.54 trillion.
 
This would bring FDI below $1 trillion for the first time since 2005.
 
FDI is projected to decrease by a further 5 to 10 per cent in 2021 and to initiate a recovery in 2022.
 
A rebound in 2022, with FDI reverting to the prepandemic underlying trend, is possible, but only at the upper bound of expectations.
 
The outlook is highly uncertain.
 
Prospects depend on the duration of the health crisis and on the effectiveness of policy interventions to mitigate the economic effects of the pandemic.
 
Geopolitical and financial risks and continuing trade tensions add to the uncertainty.
 
The pandemic is a supply, demand and policy shock for FDI.
 
The lockdown measures are slowing down existing investment projects.
 
The prospect of a deep recession will lead MNEs to re-assess new projects.
 
Policy measures taken by governments during the crisis include new investment restrictions.
 
Starting in 2022, investment flows will slowly recover, led by GVC restructuring for resilience, replenishment of capital stock and recovery of the global economy.
 
MNE profit alerts are an early warning sign.
 
The top 5,000 MNEs worldwide, which account for most of global FDI, have seen expected earnings for the year revised down by 40 per cent on average, with some industries plunging into losses.
 
Lower profits will hurt reinvested earnings, which on average account for more than 50 per cent of FDI.
 
Early indicators confirm the immediacy of the impact.