Kearney's 2021 FDI Confidence Index® reveals high level of risk aversion as investors measure COVID-19 impact and anticipate slow recovery for investment flows

WASHINGTON, March 24, 2021 /PRNewswire/ -- Kearney's Global Business Policy Council today released its 2021 Foreign Direct Investment (FDI) Confidence Index, an indicator of FDI flows. The ranking reveals a significant fall in overall optimism about the global economy since pre- and early-pandemic levels last year. Investors say they are more cautious as they gear up for a long-haul recovery for investment flows, according to the new report from the global strategy and management consulting firm.

"A year into the pandemic and its severe disruption to the global economy, investors understandably appear chastened," says Paul A. Laudicina, founder of the FDI Confidence Index^® and Kearney's Global Business Policy Council. "In last year's survey, investors displayed a strong level of optimism about the global economy and their investment outlook, and many were caught flat-footed by the COVID-19 disruption that brought the world to an economic standstill."

This year's rankings point to continued apprehension and uncertainty about how quickly the global economy will recover post-COVID. In addition to the fall in confidence about the economy, most of the overall scores for the top-25 countries have fallen compared with previous years. Only 57 percent of investors are optimistic about the three-year global economic outlook, which is much lower than the corresponding figure last year of 72 percent (prior to and at the onset of the pandemic).

Reflecting investors' increased caution this year, developed economies account for the lion's share of our top-25 list for two primary reasons. "First, established markets represent more safety and stability to business leaders whose strategies and bottom lines have been shaken by the pandemic," said Erik Peterson, managing director of the Global Business Policy Council and co-author of the study. "And, second, investors continue to prioritize destinations with strong infrastructure, strong governance, investment in technology and innovation, and macroeconomic stability—natural strengths of most developed markets."

Only three emerging markets are on this year's Index: China, the United Arab Emirates, and Brazil. China remains the highest-ranked emerging market, a distinction the country has held consistently since 1999. However, concern over escalating US–China trade tensions and a more general corporate rethink of international supply chains could explain its drop to 12th place. In addition, the virtual disappearance of emerging and frontier markets from the Index could be a reflection that investors believe the rollout of vaccines in emerging markets will be highly uneven, both for logistical and economic factors.  

"Beyond these findings, the biggest risk that international investors will continue to face will be the pandemic itself," Peterson adds. "Overcoming COVID-19 will be key to global economic recovery and the improvement in FDI flows as the two go hand in hand. And economic growth in the near term will be determined in large part by the duration of the global pandemic, the effectiveness of fiscal and monetary responses, and the success of vaccination efforts."

Laudicina adds, "Despite persistent macroeconomic challenges, investors continue to perceive FDI as vital to corporate profitability and competitiveness over the next three years. And even with investors' increased caution this year, the FDI plunge in 2020 will likely not become a permanent feature of the global economy."

About The 2021 Kearney FDI Confidence Index^® 

The Kearney Foreign Direct Investment Confidence Index (FDICI) is an annual survey of global business executives that ranks markets that are likely to attract the most investment in the next three years. In contrast to other backward-looking data on FDI flows, the FDICI provides unique forward-looking analysis of the markets that investors intend to target for FDI in the coming years. Since the FDICI's inception in 1998, the countries ranked on the Index have tracked closely with the top destinations for actual FDI flows in subsequent years.

The 2021 FDICI is constructed using primary data from a proprietary survey of senior executives of the world's leading corporations. The survey was conducted between January and February 2021. Respondents include C-level executives and regional and business leaders. All participating companies have annual revenues of $500 million or more. The companies are headquartered in 30 countries and span all sectors. The selection of these countries was based on UNCTAD data, with the 25 countries represented in the Index originating more than 95 percent of the global flow of FDI in recent years. Service-sector firms account for about 44 percent of respondents, industrial firms for 33 percent, and IT firms for 22 percent.

The Index is calculated as a weighted average of the number of high, medium, and low responses to questions on the likelihood of making a direct investment in a market over the next three years. Index values are based on responses only from companies headquartered in foreign markets. For example, the Index value for the United States was calculated without responses from US-headquartered investors. Higher Index values indicate more attractive investment targets.

All economic growth figures presented in the report are the latest estimates and forecasts available from Oxford Economics unless otherwise noted. Other secondary sources include investment promotion agencies, central banks, ministries of finance and trade, relevant news media, and other major data sources.

About Kearney

As a global consulting partnership in more than 40 countries, our people make us who we are. We're individuals who take as much joy from those we work with as the work itself. Driven to be the difference between a big idea and making it happen, we help our clients break through.

To learn more about Kearney, please visit www.kearney.com.

For past editions of the FDI Confidence Index, please go to: www.kearney.com/foreign-direct-investment-confidence-index.

Media contact:
Meir Kahtan
Meir Kahtan Public Relations, LLC
+1 917-864-0800
[email protected]

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