Pandemic risk: doesn’t it really matter? Foreign direct investment after COVID-19

Małgorzata Jaworek, Włodzimierz Karaszewski, Magdalena Kuczmarska

DOI: http://dx.doi.org/10.12775/EiP.2020.019

Abstract


Motivation: This article focuses on a foreign direct investment (FDI), one of the most important areas in the global economy which to a large extent determines the current directions of economic development. The recent pandemic is expected to cause a deep recession in the world economy. Its level, duration and strength in particular countries cannot be predicted. Nevertheless, there is no doubt that the entire world will be affected by it for a longer period of time.

Aim: The aim of this article is to present how investors identify pandemic-related threats among FDI risks. Also discussed are investors’ first reactions to the current SARS-CoV-2/COVID-19 pandemic, as reflected by forecast revisions of FDI flows.

Results: Our studies show that Polish direct investors did not take into account threats such as natural disasters, epidemics or pandemics in their risk assessments. When undertaking FDI, Polish entities focused mainly on assessing the risk of the country in which they were to invest. According to UNCTAD’s study from 2017, global risk sources were identified by multinational companies mostly as geopolitical uncertainties, terrorism and social instability rather than natural disasters (including pandemics). Even though the risk of a pandemic was nearly totally ignored by the respondents of the discussed studies, UNCTAD forecasts the downward pressure on global FDI from –30 to –40% for 2020–2021.


Keywords


foreign direct investment; FDI; global risk

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References


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