Foreign direct investment (FDI) is at a crossroads, according to the latest Global Investment Trends Monitor released by UN Trade and Development (UNCTAD).
In 2024, global FDI rose 11% to an estimated $1.4 trillion but dipped by 8% when excluding flows through European conduit economies – which often serve as transfer points for investments before they reach their final destination – reflecting a world grappling with shifting economic dynamics and persistent uncertainties.
Developed Economies: Divergent Trends
Developed economies presented a mixed picture. North America experienced a 13% FDI increase, primarily fueled by an 80% surge in US mergers and acquisitions (M&A) activity. Greenfield projects in the US saw a remarkable 93% value growth, reaching $266 billion, driven by major semiconductor projects. The United Kingdom and Italy also showed strong greenfield investment increases, with 32% and 71% rises, respectively.
In contrast, Europe saw a 45% FDI decline (excluding conduit economies), with 18 of 27 EU countries experiencing decreases. Germany and Italy faced significant FDI drops of 60% and 35%, respectively. Greenfield investments across Europe fell 10%, although a 15% rise in total project value highlighted the impact of a few large-scale projects. International project finance, crucial for infrastructure and energy, also declined, with a 26% drop in deal numbers and almost a third in value across developed economies.
Developing Economies: Mixed Results
FDI in developing economies fell 2%, the second consecutive annual decline, jeopardizing progress on Sustainable Development Goals (SDGs) reliant on international finance. SDG-related investments dropped 11% globally in 2024, with fewer projects in key areas like agrifood, infrastructure, and water and sanitation compared to 2015 when the goals were set.
Asia, the largest FDI recipient among developing regions, saw a 7% decline, with China experiencing a 29% drop, now 40% below its 2022 peak. Conversely, India's FDI rose 13%, boosted by greenfield project announcements. ASEAN countries saw modest 2% FDI growth, reaching a record $235 billion.
Latin America and the Caribbean experienced a 9% FDI decline, with Brazil's inflows falling 5%. However, greenfield project numbers and values increased in Brazil, Argentina, and Colombia, suggesting potential future recovery. Mexico's FDI rose 11%, demonstrating resilience despite weaker regional project announcements.
Africa recorded an 84% FDI surge to $94 billion, mainly due to a single megaproject in Egypt. Excluding this, the continent's FDI rose 23%, remaining modest at $50 billion.
Looking ahead
Moderate FDI growth is expected in 2025, supported by improved financing conditions and renewed M&A activity. However, geopolitical tensions and global economic instability pose significant risks. The continued decline in greenfield investments and international project finance emphasises the need for robust, diversified strategies to attract and sustain investment, particularly in sectors crucial for sustainable development. Both developed and developing economies face high stakes as they navigate this complex landscape.
