The Impacts of COVID-19 Pandemic on Foreign Direct Investment

Stavros G. Efthimiou ()
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Stavros G. Efthimiou: University of Piraeus

A chapter in Economic Growth, Prosperity and Sustainability in the Economies of the Balkans and Eastern European Countries, 2024, pp 103-127 from Springer

Abstract: Abstract In recent years, international economic growth has been slow. The influence of the COVID-19 pandemic on the world’s economies must be considered. COVID-19 is not only a risk to the public health sector, but it is also a serious threat to the entire global economy. The purpose of this article is to present and analyse the effects of COVID-19 on the Greek and Chinese economies. More specifically, this paper empirically examines how the coronavirus disease (COVID-19) has impacted foreign direct investment (FDI) in Greece and China, two economies of different locations and sizes. COVID-19 has plunged the world into the deepest recession in recent years, with unprecedented levels of deprivation, economic hardship and unemployment. Western economies, such as Greece, did not show better reflexes than China in containing the pandemic, with the result that this unprecedented situation, with the emergence of COVID-19, has had a negative effect on global flows of foreign direct investment (FDI). FDI flows must be differentiated on the basis of two different entry modes—Greenfield FDI, and cross-border mergers and acquisitions (M&A). The severity of COVID-19 in the host countries adversely affected FDI in different sectors regardless of entry mode, but the effect of the home countries’ COVID-19 situation on FDI was not so adverse. The COVID-19 pandemic actually boosted FDI. The main causes could possibly be the reduction of the companies’ ability to invest due to the lack of skilled workers as a result of health security concerns, as well as the drop in the level of corporate profits on one hand and the increase of financing costs on the other. Additionally, it is easy to see that investment trends have been broadly negatively affected in most economies. All these factors are made more apparent by finding that most economies, regardless of geography, experience a very high level of risk perception in investment and financial markets. Finally, this note is an introduction and preliminary statement of the impact of COVID-19 on FDI.

Keywords: Covid-19; FDI; Global economy (search for similar items in EconPapers)
JEL-codes: F23 O10 O16 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-3-031-58437-4_6

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DOI: 10.1007/978-3-031-58437-4_6

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