The latest monthly briefing on the global economy examines the effects of the pandemic on Net International Investment Positions (NIIP) – one of the metrics used to measure a country's financial standing in relation to the rest of the world.
Between the end of 2019 and the second quarter of 2021, the number of countries with positive net international investment positions (net creditors) increased from 27 to 30, among 107 countries for which data is available. At the same time, the number of countries with negative net international investment positions (net debtors) declined from 80 to 77. During this period, external assets accumulated more than external liabilities.
Among G20 countries, the main driver of the rapid growth of external assets and liabilities is external portfolio investments, particularly in equities. The stock markets in several countries, particularly in the United States, recovered promptly. Given G20 countries’ significant exposure to US financial assets, the anticipated monetary tightening in the United States, and associated asset price adjustments, may lead to adjustments of the NIIPs in other G20 countries. Meanwhile, the data for the 13 least developed countries (LDCs) show that the NIIP dynamics of LDCs reflect current account balances, most of which deteriorated directly due to minimal portfolio investment flows.
Global economic trends are continuing to shift significantly as the crisis in Ukraine unfolds. Oil prices have risen to the highest level they have reached since 2014. Moreover, as Ukraine is one of the largest wheat exporters in the world, wheat prices surged to the highest level in 10 years amid supply concerns. Because equity prices have already been volatile in major stock markets in part due to the pandemic, the escalating crisis in Ukraine will likely further worsen the terms-of-trade for countries with high import-dependency of wheat and fuels. The terms of trade deterioration will also adversely impact their NIIPs, especially if they are already net debtor countries, including most of the LDCs.
Learn more in the March Monthly Briefing on the World Economic Situation and Prospects from UN DESA’s Economic Analysis and Policy Division.
