Report forecasts 10% FDI decline in 2021
Malawi and other sub-Saharan Africa countries are expected to register a 10 percent drop in foreign direct investments (FDI) this year, as inflows remain subdued due to the ongoing the Covid-19 pandemic, a new UN report has shown.
The United Nations Conference on Trade and Development (Unctad) latest report shows that FDI—investment made by a company or individual from one country in business interests in another country—will drop to $25.2 billion, from last year’s $28 billion.
The Investment Trends Monitor says that developing economies such as Malawi are expected to experience a big fall in FDI because they rely more on investment in global value chain.
Globally, the report says, FDI inflows which collapsed in 2020, falling 42 percent from $1.5 trillion in 2019 to an estimated $859 billion will further weaken this year, risking sustainable recovery.
In a statement accompanying the report, Unctad director of investment division James Zhan said the effects of the pandemic on investment are prevalent as investors are likely to remain cautious in committing capital to new overseas productive assets.
Malawi Investment and Trade Centre (Mitc) acting public relations manager Modie Chanza, in a response to e-mailed questionnaire on Monday, said pledges recorded between July and December 2020 declined by more than 40 percent compared to the same period in 2019.
She said: “Mitc generates the pledges through investment missions abroad, inward investor delegations, online inquiries and walk-ins but with the travel restrictions introduced by many governments and a contraction in business operations, Mitc received low investor traffic in 2020 and the tourism sector has been hit hard.
“In this time, many businesses have been directly or indirectly affected by the pandemic; hence, it is not surprising to note a slowdown in FDI flows in the region and across the globe.”
But Chanza was upbeat that with the Covid-19 vaccine that will arrive in the country soon, the different reform agendas and the strategies government is putting in place, investors will gain confidence and return to business soon.
She said: “It is also very like that the decline was also necessitated by the uncertainty that came along with the election period. Now that the new government is in place, this will boost investor confidence.”
Reacting to the report, University Malawi Chancellor College economics professor Ben Kaluwa observed that the country faces a continued blow in its quest to attract FDI due to the Covid-19 pandemic.
He said: “FDI to Malawi will indeed not be easy in the times where business has been disrupted globally in view of the Covid-19 pandemic.”
Over the years, FDI has been fluctuating due to a number of factors.
