Foreign direct investment was down by an estimated 8% in 2024, challenging progress on the Sustainable Development Goals that heavily rely on international project finance.
© Shutterstock/PradeepGaurs | A factory manufacturing integrated circuits in Uttar Pradesh State, India. Megaprojects megaprojects in semiconductors largely drove global greenfield investments in 2024.
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% 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: A tale of two regions
Developed economies experienced sharp contrasts. North America saw a 13% rise in FDI, driven by an 80% increase in US mergers and acquisitions (M&A). The value of greenfield projects – new investments in foreign markets – surged 93% in the US, reaching $266 billion, spurred by semiconductor megaprojects. The United Kingdom also saw a 32% increase in greenfield investments to $85 billion, and Italy posted a remarkable 71% jump to $43 billion.
Europe, however, faced steep declines. FDI fell 45% when excluding conduit economies, with 18 out of 27 European Union countries seeing drops. Germany’s FDI plunged 60% and Italy’s fell 35%. Even greenfield investments, vital for future growth, dropped 10% across Europe, though the region saw a 15% 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% in number and nearly a third in value across developed economies.
Developing economies: Mixed signals
In developing economies, FDI fell 2%, 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% 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%. China faced a 29% drop, now 40% below its 2022 peak. In contrast, India recorded a 13% increase in FDI, boosted by growth in greenfield project announcements. Meanwhile, ASEAN countries (Brunei Darussalam, Burma, Cambodia, Indonesia, Laos, Malaysia, Philippines, Singapore, Thailand and Vietnam) saw modest growth, with FDI increasing 2% to a record $235 billion.
In Latin America and the Caribbean, FDI declined by 9%, with Brazil’s inflows falling 5%. However, greenfield project numbers and values rose in Brazil, Argentina and Colombia, signaling potential future recovery. Mexico’s FDI rose 11%, despite weaker regional project announcements, showing resilience in the face of broader challenges.
Africa stood out, recording an 84% surge in FDI to $94 billion, largely due to a single megaproject in Egypt. Excluding this project, the continent’s FDI rose 23%, though the overall figure remained modest at $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.