In coronavirus-era Kearney survey, U.S. tops list for foreign investment — with Germany, UK falling but still in top 10

Global Risk Management Solutions (GRMS)

The consulting firm Kearney captured a snapshot of the coronavirus disruption this fall while conducting its 2020 survey for the Kearney Foreign Direct Investment (FDI) Confidence Index.

The United States tops the list for the eighth straight year, according to the report, which came out last month. It said that foreign investors have confidence in investing in the U.S. because of its business-friendly climate, market size and tech infrastructure.

Countries that round out the top five nations favored by investors include, in order, Canada, Germany, Japan and France. The United Kingdom fell two spots from last year to sixth place.

Kearney said the survey captured an overall optimism for foreign investment during March before the coronavirus crisis reached global levels. And by the last two weeks of the survey, COVID-19 had become a pandemic that dampened investor confidence across the board — for developed nations, emerging ones and frontier markets alike.

“The pandemic and its subsequent economic shocks show just how quickly and profoundly the external operating environment can change,” says Paul A. Laudicina, founder of the FDI Confidence Index and Kearney’s Global Business Policy Council, in a press release. “Some markets will recover faster than others, and this likely explains why there appeared to be a return to the fundamentals — to large, more stable markets with more predictable political and regulatory structures.”

Kearney uses “developed markets” to describe countries that the International Monetary Fund classifies as advanced economies based on high income per capita, high export diversification and strong integration into the global financial system. “Emerging markets” are countries that have middle levels of those features. “Frontier markets” are countries with generally low levels of income per capita, less advanced regulatory environments and weak integration with the global financial system.

Climate change also was on the minds of investors, Kearney said:

“Before the full impact of the COVID-19 challenge was clear, business leaders were focused on climate change. Our survey suggests that climate-related risks are affecting the FDI assets of four-fifths of companies and are likely to influence the investment decisions of 77% of investors over the next three years. Investors rank extreme temperatures as the biggest climate change risk. The majority also expect climate regulations to strengthen in the coming years. More than half of investors expect financial losses as a result of climate change.”

The UK fell two spots in the rankings because of Brexit uncertainty and the coronavirus lockdown, which cut into the UK's projected growth and despite that the UK economy had outpaced 2019 growth in France and Germany, the Kearney report said.

The only developing nations in the top 25 are China, Brazil and the United Arab Emirates. China fell to its lowest level but is still in the top 10.

Here’s a look at the top 25 nations and their movement from last year’s ranking.

Rank Country Change from 2019
1 United States 0
2 Canada +1
3 Germany -1
4 Japan +2
5 France 0
6 United Kingdom -2
7 Australia +2
8 China -1
9 Italy -1
10 Switzerland +3
11 Spain 0
12 Singapore -2
13 New Zealand +6
14 Netherlands -2
15 Sweden 0
16 Belgium +2
17 South Korea 0
18 Ireland +2
19 United Arab Emirates NA
20 Denmark -6
21 Portugal NA
22 Brazil NA
23 Finland 0
24 Norway 0
25 Taiwan -3

 

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