COVID-19 pandemic could shrink global FDI by 30-40 percent: Study

The UN body also warned that the negative impact of the virus is likely to spread and increase further and it will continue to monitor the outbreak and its potential impact on FDI and global value chains.

The negative impact of COVID-19 pandemic on the global foreign direct investment (FDI) will be more dramatic than the previous projections of -5 percent to -15 percent, says a new report by the United Nations Conference on Trade and Development (UNCTAD), the main U.N. body dealing with trade, investment, and development issues.

In its previous report, the UN trade body warned that that flows may hit their lowest levels since the 2008-2009 financial crisis. However, the updated projections are more alarming.

"The reassessment is far more severe than the first projections which were based on the data limited to the February and on previous expectations that the primary immediate impact would on East Asia, with spillover effects to other regions through global supply networks," the report said.

According to the updated estimates of COVID-19's economic impact and revisions of earnings of the largest multinational enterprises (MNEs), the downward pressure on FDI flows could range from -30% to -40% during 2020-2021 with energy and basic materials industries being the hardest-hit sectors (-208% for energy, with the additional shock caused by the recent drop in oil prices), airlines (-116%) and the automotive industry (-47%).

The UN body also warned that the negative impact of the virus is likely to spread and increase further and it will continue to monitor the outbreak and its potential impact on FDI and global value chains.