Analysis of Developments in EU Capital Flows in the Global Context (2021): Rise and fall after the COVID-19 outbreak. CEPS External Contribution February 2022.

Alcidi, Cinzia and Postica, Doina and Shamsfakhr, Farzaneh and Pieter De Groen, Willem (2022) Analysis of Developments in EU Capital Flows in the Global Context (2021): Rise and fall after the COVID-19 outbreak. CEPS External Contribution February 2022. UNSPECIFIED.

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Abstract

After 2020’s unprecedented fall in GDP, most countries have managed to recover quite rapidly in 2021, thanks to similarly unprecedented policy responses. After the abrupt falls of early 2020, pre-existing global capital flows trends have resumed and even strengthened. FDI accelerated their fall, especially in the EU, while portfolio investment increased quite strongly. Other forms of investment, and in particular banking holdings, seem to have weathered the pandemic well. This is in stark contrast with the global financial crisis of 2007-09. Uncertainty, however, remains elevated. The economy remains fragile, public debt has increased enormously and new risks, from inflation to geopolitical instability, are intensifying. This study provides evidence of these trends and undertook an in-depth investigation into several selected issues relevant to EU capital flows.

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