Financial assistance to the world’s 83 weakest economies fell by 15 per cent in 2020, to $35 billion as a direct result of the Covid-19 pandemic, UN trade and development experts UNCTAD said on Monday.

According to UNCTAD’s World Investment Report 2021, total foreign direct investment also dropped by more than a third globally, to $1 trillion (from $1.5 trillion in 2019), threatening progress on sustainable development.

This level was last seen in 2005 and it is an urgent problem because foreign direct investment is vital to promoting sustainable development in the world’s poorest regions, said Isabelle Durant, Acting Secretary-General of UNCTAD.

“The (Covid-19) crisis has had an immense negative impact on the most productive types of investment, namely, greenfield investment in industrial and infrastructure projects”, she said. “This means that international production, an engine of global economic growth and development, has been seriously affected.”

Regionally, Europe saw foreign direct investment fall 80 per cent last year, while flows to North America fell by 42 per cent, which was attributed to a fall in reinvested earnings.

Other developed economies saw an average drop of 20 per cent, UNCTAD said, while the African continent saw a 16 per cent fall in foreign direct investment — to $40 billion – a level last seen 15 years ago.

Significantly, greenfield project announcements in Africa also tumbled 62 per cent, hurting industrialisation prospects, and commodity-exporters were the worst-hit.

Looking ahead, UNCTAD said that global foreign direct investment flows were expected to bottom out in 2021 and recover some lost ground, with an increase of about 10 to 15 per cent. But this would still leave levels “some 25 per cent below the 2019 level”.

Read the full article about the impact of depleted foreign investments in 2020 at Eco-Business.