Global FDI flows at $1.82trn in 2021 rise above pre-Covid levels

BY MADUABUCHI EFEGADI

New data and analysis by the Organisation for Economic Cooperation and Development (OECD) show that global foreign direct investment (FDI) flows bounced back in 2021, rising by as high as 37 percent above the pre-pandemic levels, and by 88 percent to $1.815 trillion.

However, the outlook is said to remain uncertain given the current geopolitical context, according to the report.

The OECD analysis of the flows shows that the US, by far the world’s largest economy, led the beneficiaries with FDI accretion of more than $382 billion, followed by China, which received $334 billion in the year under review. Other recipients include Canada which came far in third place with $60 billion, and then Brazil at $50 billion.

“The United States was also the largest source of FDI outflows, which peaked in 2021, boosted by high levels of reinvestment of earnings. Germany, Japan, China and the United Kingdom followed, with more than US$100 billion outflows in 2021,” the report said.

The OECD data also indicates that greenfield investment is well above pre-Covid levels in advanced countries, but remains weak in emerging and developing economies.

This growth was driven by OECD area earnings on inward and outward FDI reaching some of their highest levels since 2005. Of those earnings, less was distributed to shareholders, resulting in unprecedented levels of reinvestment of earnings. Inflows to the OECD area exceeded pre-pandemic levels by five percent and outflows reached a seven-year record-high, boosted by high levels of reinvestment of earnings.

FDI inflows to non-OECD G20 economies were 47 percent above pre-pandemic levels, while FDI outflows to the latter economies were 20 percent above pre-pandemic levels.

Completed cross-border mergers and acquisitions (M&A) deals exceeded pre-pandemic levels by 50 percent in advanced economies and by 25 percent in emerging and developing economies.

The rebound in greenfield investment activity was less even, increasing in advanced economies to surpass pre-pandemic levels by 16 percent, but remaining subdued in emerging and developing economies.

Unfortunately, Africa, a continent of 1.3 billion people with a combined GDP of about $3 trillion, which has been worst-hit by the pandemic, is not in reckoning in the data. Let alone Nigeria, a crisis beleaguered country still in the throes of economic recession.

The country’s marginal economic notches have hardly been able to get it to fully wriggle out of the pangs of the recession it first slipped into 2016.

With national elections only months away, finance and economic development analysts say it would be a herculean task to get things right up again.