Covid-19 pandemic to heavily impact on FDIs, says Unctad
The outbreak and spread of Covid-19 will cause a dramatic drop in global foreign direct investment (FDI) flows, says intergovernmental body, the United Nations Conference on Trade and Development (Unctad).
Since the organisation’s first Special Issue on the impact of the pandemic, updated economic impact estimates and earnings revisions of the largest multinational enterprises (MNEs) now suggest that the downward pressure on FDI could be 30% to 40% during this year and next.
Earnings guidance by MNEs in Unctad’s Top 100, confirms the rapid deterioration of prospects − 61% of MNEs have issued new statements since the first week of March.
In addition to earlier concerns on production and supply chain disruptions among firms with strong supply chain links to China, 57% of MNEs have added warnings on the impact on sales of the global demand shock caused by the pandemic.
Covid-19 is no longer just a global value chain (GVC) problem.
On average, the top 5 000 MNEs, which account for a significant share of global FDI, have now seen downward revisions of 2020 earnings estimates of 30% owing to Covid-19 and the trend is likely to continue.
Hardest hit are the energy and basic materials industries (-208% for energy, with the additional shock caused by the drop in oil prices), airlines (-116%) and the automotive industry (-47%).
The latter industry was the first to see earnings revisions anticipating the supply chain shock.
Industries now expecting to be hit by a global decline in demand are rapidly catching up.
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