FDI Fall in Recent Years

FDI fall in recent years
The global as well as Bangladesh’s FDI inflows declined sharply due to the devastating impact of the
pandemic. The global lockdown slowed existing investment projects and the prospect of a deep
recession led multinational enterprises (MNEs) to reconsider new projects.
Global foreign direct investment (FDI) collapsed in 2020, falling 42% from $1.5 trillion in 2019 to an
estimated $859 billion, according to an UNCTAD Investment Trends Monitor published on 24
January.
Developed economies saw the biggest fall, with FDI reaching an estimated $98 billion in the six-
month period – a decline of 75% compared to 2019. The trend was amplified by sharply negative
inflows in European economies, mainly in the Netherlands and Switzerland.
On the other hand, the 12% decrease in FDI flows to developing economies was not so high. It was
less than expected. In the six months to June 2020, developing countries in Asia accounted for more
than half of global FDI. Flows to economies in transition were down 81% due to a strong decline in
the Russian Federation.
Despite projections for the global economy to recover in, it is expected that FDI flows will remain
weak due to uncertainty over the evolution of the COVID-19 pandemic.
As the pandemic hit the global economy, developing and also developed countries started to rethink
about their foreign investments. As a result, the FDI inflows are declining globally at a sharp rate. It is
declining in a drastic way.
It has been projected that a 5-10% FDI slide in 2021 in last year’s World Investment Report.
FDI inflows: global and by group of economies, 2007–2020 (billions of US dollars)

FDI inflows by Region
Developed countries
The decline in FDI was concentrated in developed countries, where flows plummeted by 69% to
an estimated $229 billion.
Flows to North America declined by 46% to $166 billion. The United States recorded a 49%
drop in FDI, falling to an estimated $134 billion. The decline took place in wholesale trade,
financial services and manufacturing.
Some countries of Europe had experienced increase in FDI inflows. For example, Sweden saw
flows double from $12 billion to $29 billion. FDI to Spain also rose 52%, because of several
acquisitions, such as private equities from the United States.
Among other developed economies, flows to Australia fell (-46% to $22 billion) but increased
for Israel (from $18 billion to $26 billion) and Japan (from $15 billion to $17 billion).
FDI inflows by region, 2019 and 2020 (billions of US dollars)

Developing economies
Although FDI flows to developing economies decreased by 12% to an estimated $616 billion, they
accounted for 72% of global FDI, which is the highest share recorded.
The fall was highly uneven across developing regions: 37% fall in Latin America and the Caribbean,
fall of 18% in Africa and 4% fall in developing countries in Asia. FDI to transition economies
declined by 77% to $13 billion.
While developing countries in Asia attracted an estimated $476 billion in FDI in 2020, flows to
members of the Association of Southeast Asian Nations (ASEAN) decreased by 31% to $107 billion,
due to a decline in investment.
In the matter of individual nations, China was the world’s largest FDI recipient, with flows to the
Asian giant rising by 4% to $163 billion. High-tech industries saw an increase of 11% in 2020.
India, another major emerging economy, also recorded positive growth (13%), boosted by
investments in the digital sector.
Role of FDI in Economic growth

Economic growth is one of the keys, which is important to all countries of the world. And the
countries formulate many special plans and policies because increase of economic growth shows
increase of social welfare and also the increase of the country’s economic development in long-
term. In economics, many variables are effective on economic growth; for example, natural
resources, technology, physical capital, human capital, and so on. At the same time, foreign
Direct Investment (FDI) is one of the factors which bring the mentioned growth under its effect.
Foreign investment may influence economic growth in both direct and indirect ways. The direct
effect is that, foreign direct investment increases production, employment, added value and
export. These factors have a direct impact on GDP; for instance, employment increases the
individual’s income. This increasing income is directly calculated in GDP. In the same way, for
added value and export.
Foreign investment increases GDP indirectly as well; for example, transition of technology,
knowledge and know-how through license, imitation and job training. Besides, externalities,
technology spillover, human capital formation, efficiency and productivity are the factors which
indirectly increase GDP in economic growth. When the production technology is improved
naturally the products would be supplied with higher quality and lower cost, and therefore,
national production and per capita output would increase.

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FDI fall in recent years

FDI inflows: global and by group of economies, 2007–2020 (billions of US dollars)

FDI inflows by region, 2019 and 2020 (billions of US dollars)

Role of FDI in Economic growth

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