Foreign direct investment in the storm of the COVID-19 pandemic and the example of Visegrad countries

Kalman Kalotay and Magdolna Sass

Acta Oeconomica, 2021, vol. 71, issue supplement1, 73-92

Abstract: The immediate effects of COVID-19 on the global flows of foreign direct investment (FDI) were devastating, resulting in a large drop. Flows to the Visegrad countries were also affected but less than the world average. The fall in FDI was the result of underlying trends that started before the pandemic but accentuated by the latter, creating a “perfect storm”. These secular trends include the digitalisation of production and the birth of Industry 4.0, resulting in more asset-light international production and reorganisations of company networks, the sustainability imperative, making the impact of FDI more relevant than its quantity, and a slowdown in the liberalisation of the policy framework for FDI both in individual countries and at the multilateral level. The recovery of FDI from the shock of 2020 is expected to be long and it will be impossible to return to the pre-pandemic structural and geographical patterns. Building resilience and diversification of production at the expense of the search for the lowest-cost locations will be the top priorities of investors, forcing the host countries to revise their investment promotion strategies focused on cost reduction. In the Visegrad countries, the model based on low labour costs will sooner or later reach its limits.

Keywords: foreign direct investment; crisis; pandemic; Visegrad countries (search for similar items in EconPapers)
JEL-codes: F21 F23 L52 O25 O52 (search for similar items in EconPapers)
Date: 2021
Note: The views are those of the author and do not necessarily reflect the opinion of the United Nations.
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