Foreign Direct Investment (FDI) saw an 11% rise in 2024, reaching an estimated $1.4 trillion. Nevertheless, excluding European conduit economies, FDI dipped by 8%. This highlights a global landscape in flux, characterized by economic shifts and ongoing uncertainties.
FDI in developed economies showed contrasting results. North America, particularly the US, experienced a surge in FDI, according to the latest Global Investment Trends Monitor released by UN Trade and Development (UNCTAD). This surge was driven by a sharp rise in mergers and acquisitions (M&A). There was also a 93% increase in greenfield projects. These included semiconductor projects, which pushed US greenfield investments to $266 billion.
In contrast, Europe faced significant Foreign Direct Investment declines. Excluding conduit economies, European FDI fell by 45%. Countries like Germany and Italy experienced sharp drops of 60% and 35%, respectively. Greenfield investments also saw a decline across the continent, with a 10% decrease.
International project finance, crucial for infrastructure and energy investments, also dropped. There was a 26% decline in deals. Additionally, there was a nearly 30% drop in deal value across developed economies.
DEVELOPING ECONOMIES: MIXED RESULTS AND DECLINING SDG INVESTMENTS
Foreign Direct Investment in developing economies dropped by 2%, marking the second consecutive annual decline. This downturn poses risks to progress on the Sustainable Development Goals (SDGs), which rely heavily on international investments. SDG-related projects saw an 11% decrease globally, particularly in sectors like agrifood, infrastructure, and water sanitation.
Asia, the largest FDI recipient among developing regions, recorded a 7% drop. China saw a significant decline of 29%, now 40% below its 2022 peak. In contrast, India saw a 13% increase in FDI, driven by greenfield projects. ASEAN countries, including Vietnam and Thailand, experienced modest growth, with FDI rising 2%.
Latin America and the Caribbean experienced a 9% decrease in FDI. Nonetheless, Brazil, Argentina, and Colombia saw growth in greenfield investments, signaling potential recovery. Mexico saw an 11% increase in FDI despite weaker regional announcements.
Africa emerged as an outlier, experiencing an 84% increase in FDI, largely due to a single megaproject in Egypt. Excluding this project, Africa’s FDI still rose by 23%, though the overall figure remained modest at $50 billion.
THE ROAD AHEAD: CAUTIOUS OPTIMISM FOR 2025
Looking to 2025, moderate FDI growth is expected, supported by improved financing conditions and renewed M&A activity. However, geopolitical tensions and economic instability present significant risks.
The decline in greenfield investments and international project finance emphasizes the need for diversified strategies. These strategies aim to sustain investment, particularly in sustainable sectors. Both developed and developing economies face challenges in attracting and maintaining FDI in this complex landscape.
