Foreign direct investment (FDI) is at a crossroads, according to the latest Global Investment Trends Monitor released by UN Trade and Development (UNCTAD) on 20 January.
In 2024, global FDI rose 11 per cent to an estimated US$1.4 trillion but dipped by 8 per cent 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: A tale of two regions
Developed economies experienced sharp contrasts. North America saw a 13 per cent rise in FDI, driven by an 80 per cent increase in US mergers and acquisitions (M&A). The value of greenfield projects – new investments in foreign markets – surged 93 per cent in the US, reaching US$266 billion, spurred by semiconductor megaprojects. The United Kingdom also saw a 32 per cent increase in greenfield investments to US$85 billion, and Italy posted a remarkable 71 per cent jump to US$43 billion.
Europe, however, faced steep declines. FDI fell 45 per cent when excluding conduit economies, with 18 out of 27 European Union countries seeing drops. Germany’s FDI plunged 60 per cent and Italy’s fell 35 per cent. Even greenfield investments, vital for future growth, dropped 10 per cent across Europe, though the region saw a 15 per cent rise in total project value, signaling the significance of a few large-scale projects.
International project finance – a key driver for infrastructure and energy investments – also faced challenges, with deals dropping 26 per cent in number and nearly a third in value across developed economies.
Developing economies: Mixed signals
In developing economies, FDI fell 2 per cent, marking the second consecutive annual decline. This dip threatens progress on the Sustainable Development Goals (SDGs), which depend heavily on international finance. Investments in SDG-related fell 11 per cent globally in 2024, with fewer projects in agrifood, infrastructure, and water and sanitation than in 2015, when the goals were adopted.
Asia, the largest recipient of FDI among developing regions, saw inflows decline by 7 per cent. China faced a 29 per cent drop, now 40 per cent below its 2022 peak. In contrast, India recorded a 13 per cent increase in FDI, boosted by growth in greenfield project announcements. Meanwhile, Asean countries (Brunei Darussalam, Burma, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand and Viet Nam) saw modest growth, with FDI increasing 2 per cent to a record US$235 billion.
In Latin America and the Caribbean, FDI declined by 9 per cent, with Brazil’s inflows falling 5 per cent. However, greenfield project numbers and values rose in Brazil, Argentina and Colombia, signaling potential future recovery. Mexico’s FDI rose 11 per cent, despite weaker regional project announcements, showing resilience in the face of broader challenges.
Africa stood out, recording an 84 per cent surge in FDI to US$94 billion, largely due to a single megaproject in Egypt. Excluding this project, the continent’s FDI rose 23 per cent, though the overall figure remained modest at US$50 billion.
The road ahead: Cautious optimism
Looking to 2025, moderate FDI growth is expected, supported by improved financing conditions and renewed M&A activity. However, risks and uncertainties – including geopolitical tensions and global economic instability – pose significant challenges.
The continued decline in greenfield investments and international project finance underscores the need for robust, diversified strategies to attract and sustain investment, especially in sectors critical for sustainable development. For both developed and developing economies, the stakes are high as they navigate this complex landscape.
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