The decline in foreign direct investment (FDI) in the Russian Federation in January-September 2020 amounted to about 80%, according to the report of the World Bank (WB). This was facilitated by an increased level of uncertainty, low oil prices and an increase in geopolitical risks, experts explain. “In Russia, the decline in foreign direct investment from January to September 2020 was about 80%. The restrictive measures adopted at the global level had a negative impact on the implementation of existing investment projects”, the report says. The decrease in the profits of enterprises and the depreciation of the ruble led to a decrease in the volume of reinvested income, the bank also explained.
At the same time, a sharp decrease in the inflow of foreign direct investment in H1 2020 was noted in almost all developing economies, for example, in China (-17%), India (-36%) and Indonesia (-39%). However, if in EMDE countries (with emerging economies), in general, the net inflow of portfolio investments resumed in the third quarter, then in Russia, against the background of increasing geopolitical risks and an increase in the number of new cases of COVID-19, there was still a net outflow of portfolio investments. In addition, in contrast to developed economies, the values of stock exchange indices (in Russia, RTS) did not reach the level observed before the start of the pandemic by September, and the share of non-residents in the structure of government bond holders fell from 35% in February to 26.8% in September 2020 of the year.
The World Bank also noted that foreign direct investment in Russia is mainly due to the country's natural resources and more often comes from tax havens. According to the bank's specialists, Russia has untapped potential for expanding its role on a global scale, despite the fact that the country already occupies an important position in the European FDI network. “Network analysis reveals that the US, UK, China, Germany, France and Canada dominate the 'real' FDI network, while Russia is in the middle of the range, reflecting its limited global influence but moderate importance in Europe”, explained in the report.