Coronavirus outbreak will slash global investment flows – U.N.
GENEVA, Switzerland – The rapid spread of the deadly new coronavirus is expected to take a serious toll on foreign direct investments (FDI) worldwide, with United Nations (UN) economists forecasting a drop of up to 15%.
A fresh report from the UN Conference on Trade, Investment, and Development (UNCTAD) warned that regardless of how quickly the COVID-19 outbreak lasted it would significantly drag down global FDI, which is a measure of cross-border private sector investment.
Efforts to halt the spread of the virus, which has killed more than 3,800 people and infected more than 109,000 people around the world, have wreaked havoc on international business.
The UN agency pointed to estimates that growth in the global economy will slow between 0.5% and 1.5% this year, depending on whether the outbreak is reined in during the 1st half of this year or if it rages through the end of 2020.
The corresponding "downward pressure on FDI will be 5% to 15%," the report said.
That is compared to UNCTAD's January projection that global FDI inflows this year and next would be stable, with a potential increase of up to 5%, it said.
The report pointed out that more than two-thirds of the world's top 100 multinational enterprises have issued statements on the impact the outbreak is having on their business, with many warning they are slowing down capital expenditures in affected areas.
A full 41 of those companies have also issued profit alerts, which UNCTAD said would translate into lower reinvested earnings, which are a major component of FDI.
On average, the top 5,000 multinational companies have seen a downward revision of their 2020 earnings estimates of 9% due to the outbreak, UNCTAD said, adding that the automotive industry and the airlines have been hardest hit.
The report stressed that the impact would be "uneven," with the greatest effects of course felt in the countries worst affected by the outbreak.
But it cautioned that "negative demand shocks and the economic impact on supply chain disruptions will affect investment prospects in other countries."
UNCTAD stressed that China, which has been hardest hit by the outbreak so far, is feeling the most serious "demand shock," pointing for instance to Toyota, which reported a 70% drop in sales in the country in February.
"The economic impact of supply chain disruptions will affect investment prospects in other countries," it said. – Rappler.com