The global foreign direct investment flows are set to go through a U-shaped recovery, the United Nations warned, saying that it will stay weak in 2021 before picking up again in 2022. 

The UN Conference on Trade and Development (UNCTAD) on Sunday said, “Global FDI flows will remain weak in 2021,” as the nations worldwide continue to battle with the COVID-19 pandemic that has shaken the economy. 

“The decline of global FDI will bottom out in 2021, and a real recovery will start in 2022,” said James Zhan, UNCTAD’s investment and enterprise director.

FDI collapsed last year, falling by 42%, from $1.5 trillion in 2019 to approximately $850 billion in 2020, the UNCTAD in its latest Invest Trends Monitor report said. It predicted a further 10% drop in 2021. 

According to the report, FDI finished 2020 more than 30% below that 2009 global recession trough and at a level last seen in the 1990s. 

Zhan said, “Overall, the global FBI recovery is likely to follow a U-shaped recovery,” not following the suit of global trade and GDP that have been predicted to be a “V-shaped recovery” starting in 2021. 

Amidst pandemic, the speeding vaccinations against coronavirus rolling out in different nations and dragging in releasing economic aid will put brakes on an FDI comeback this year, he explained. 

“Investors are likely to remain cautious in committing capital to new overseas productive assets,” the UN report said.

It said that green-field project announcements (that is considered an indicator of future FDI trends) were 35% down in 2020, figures that “do not bode well for new investment in industrial sectors in 2021.”

Green-field investment typically refers to projects that create new physical facilities which are considered productive, in part because they normally create jobs.

The indicator is flashing red for developing countries.

“For developing countries, the prospects for 2021 are a major concern,” said Zhan.

Although FDI flows in developing economies seemed relatively resilient in 2020, greenfield announcements in such countries plunged by 46%, while international project finance — typically financial arrangements from several partners for large infrastructure projects — dropped by 7%, reports AFP.