According to the latest World Investment Report from UNCTAD, global foreign direct investment (FDI) saw an overall increase of 4% in 2024. However, when excluding financial flows through European conduit economies, FDI actually decreased by 11% during the same year.
The report also notes the importance of the digital economy, which has grown significantly since 2020, tripling its value to $360bn. The report notes that this growth risks exacerbating inequalities, given that it is highly concentrated in certain countries.
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While UNCTAD had mentioned the possibility of modest growth in 2025 earlier in the year, it changed its outlook to negative due to high investor uncertainty. It cites “geopolitical tensions and industrial policy goals” as strongly influencing global investment decisions, as well as high borrowing costs and exchange rate volatility.
Uneven development
FDI inflows decreased in most regions. Europe’s FDI flows dropped a stark 58% in 2024, with major countries like Germany experiencing sharp drops (-89%). Latin America and the Caribbean also saw a 12% drop in FDI, although projects in bigger economies such as Argentina, Brazil and Mexico suggested greater investment interest. The Middle East also had strong inflows, driven by governments’ efforts to diversify oil-dependent economies.
North America experienced the biggest growth with a 23% increase in FDI, driven by major semiconductor projects. Africa also saw a significant rise of 75%, but this was driven by one megaproject in Egypt. Excluding this one project, FDI still rose by 12%.
While Asia saw a 3% decline, this was mainly driven by a 29% decrease in FDI into China. On the other hand, ASEAN countries experienced record inflows of $225bn, a 10% increase.
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By GlobalDataThe top sources and destinations for FDI are largely similar, with six countries being in the top ten for both. The US remains at the top of both lists. UNCTAD highlights that out of the top ten sources of FDI outflows, five of these are Asian economies, underlining their growing role as global investors.
Investment trends
Greenfield investments rose in terms of project numbers but fell 5% in value. Cross-border mergers and acquisitions activity rose 14% but remained below the average of the past ten years.
International project finance – the sort of financing needed for large international development projects – fell by 26%, decreasing for the second year in a row. This drop was pronounced in the infrastructure sector, where the value of international investment project announcements fell by 14%.
Sectors critical to advancing the UN Sustainable Development Goals experienced declines as well. Foreign investment in developing countries in the infrastructure sector fell by 25%, renewable energy 31%, water and sanitation 30% and agri-food systems 19%, while healthcare was the only area that saw modest growth. On the other hand, international project finance into semiconductors and the digital economy rose substantially to 140% and 107%, respectively.
Investment policy was affected by a desire to attract capital and to develop secure supply chains for critical industries. The use of investment incentives has been highly pronounced in 2024, accounting for a record 45% of all measures to attract capital.
“The greater the reliance on incentives as investment attraction instruments runs counter to the objectives of international tax reform efforts aimed at curbing harmful tax competition for investment,” the report highlights.
At the same time, FDI screening measures continue to rise and represent more than 40% of measures less favourable to investors in the past year. Most of these measures are from developed countries in the critical raw materials and high-tech industries.
Digital economy
The report highlights that while the growth of the digital economy can bring benefits such as better infrastructure and skilled jobs, “many low-income countries remain locked out”. Infrastructure gaps, high investment risks and weak regulatory frameworks are major obstacles in attracting capital.
Since 2020, greenfield investment into the digital economy has almost tripled to $360bn and now makes up a third of all FDI greenfield projects.
“About 80% of the greenfield projects in digital sectors in the Global South went to just 10 countries – most of them in Asia,” the report highlights.
A lack of ICT infrastructure remains a major challenge to digitalisation in the Global South. In 2024, out of the $62bn in funding needed to build this infrastructure in developing countries, only $9bn was invested.
Middle-income countries in Latin America and Asia have seen growth in the fintech sector and have increasingly been targeted as destinations for data centres. However, the least-developed economies, particularly in Africa, have not enjoyed the same growth. Africa saw 18 fintech projects in 2024, almost 200 fewer than in developing Asian countries, and received 3% of data centre investments.
“The digital economy’s environmental footprint is growing, with rising energy use and e-waste,” UNCTAD noted.
While an overwhelming number of developing countries have national digital strategies, “few are linked to broader industrial, environmental or investment policies”. Most of these strategies also do not make use of local investment promotion agencies (IPAs), with only 20% mentioning them in their initiatives.
The report recommends that in order to capitalise on the advantages of international investment, countries should design strategies around the future of the digital economy through facilitating FDI while balancing national security, increasing the role of IPAs roles within these strategies and strengthening regulations.
