FDI flows surge in 2021 hinting at global recovery, says OECD

FDI inflows to India dip 51 per cent in first half of 2021

Global foreign direct investment (FDI) flows rebounded in the first half of 2021 to reach $870 billion, exceeding pre-pandemic levels by 43 per cent and more than double that of the second half of 2020, OECD data and analysis show.

China was the leading FDI recipient worldwide in the first half of 2021, followed by the US and the UK.

FDI inflows to non-OECD G20 countries increased by 12 per cent over the second half of 2020. India was an outlier and saw a 51 per cent decline during the period. The country had seen sizeable FDI inflows in the third quarter of CY20 driven by large transactions such as the acquisition of the Jio Platforms by Facebook and Unilever’s merger with GSK, a manufacturer of pharmaceutical products.

FDI inflows to the OECD area increased to $421 billion, twice as high as the inflows recorded in 2020 and 30 per cent higher than in 2019. Outflows from the OECD area increased four-fold compared to historically low levels reached in 2020 and were 75 per cent higher than in 2019.

“The signs of a recovery are apparent, supported by a flurry of cross-border deals, although growth prospects remain weak in many emerging markets and developing economies as announced greenfield projects continue to decline. New investment activity in advanced economies grew slightly, mainly driven by announced projects in the healthcare and manufacturing sectors,” OECD observed in a note.

FDI outflows from the OECD area in the first half of 2021 increased four-fold to $612 billion over H2CY2020. The US was by far the major source of FDI worldwide, followed by Japan and Germany. FDI outflows from G20 economies went up by 92 per cent in this period, while they increased by 24 per cent in non-OECD G20 economies, led by larger outbound FDI flows from Russia, Brazil and India.

Completed cross-border M&A deals overcame pre-pandemic levels in advanced economies, signalling renewed investor confidence in deal-making. New investment projects in advanced economies were also up by 9% from the second half of 2020. However, cross-border investment activity in emerging markets and developing economies continued to decline.