Global foreign direct investment (FDI) fell by 11% to US$1.5 trillion ($2.32 trillion) in 2024, marking the second straight year of decline.
The UN Trade & Development’s (UNCTAD) World Investment Report 2025 shows that despite an 11% decline in global FDI flows, Australia attracted US$53 billion in 2024, rising to eighth position.
The US remains both the top source and destination for FDI. Notably, five Asian economies rank among the top 10 sources of FDI outflows, underscoring the region’s key role as a global investor. Luxembourg rounds out the top five with Canada in sixth place.
Asia remains the top recipient region for FDI inflows, despite a 3% overall decline and a 29% drop in flows to China. Southeast Asia is a standout, with ASEAN countries up 10%, reaching a record US$225 billion in FDI.
The World Investment Report calls for “bold, coordinated action to redirect investment towards sustainable and inclusive development”. There is a sharp focus on bridging divides in the digital economy, infrastructure, and sustainable finance.
Secretary-General of UN Trade and Development Rebeca Grynspan says investment is more than just capital flows and project pipelines.
“It’s a signal of where we’re placing our bets as a society,” Grynspan says.
While the overall data shows a 4% rise, the World Investment Report 2025 notes it masks deep underlying weaknesses. The apparent growth was inflated by volatile financial conduit flows through several European economies, which often serve as transfer points for investments.
Negative outlook
As such, the outlook for 2025 has turned negative.
“Modest growth seemed possible at the start of the year, but escalating trade tensions, geopolitical fragmentation and economic volatility have led to sharp downward revisions of most FDI prospects,” UNCTAD reports.
These include GDP growth, capital formation, trade flows, financial market stability and investor confidence.
Europe has been the hardest hit region, with inflows down 58% in 2024. FDI fell in more than half of EU countries, with sharp declines in Germany (-89%), Spain (-39%), Italy (-24%) and France (-20%).
Early 2025 data shows record-low deal and project activity.
Greenfield investments – where companies build new facilities abroad – rose in number but fell 5% in value. The total announced investment remains historically high at US$1.3 trillion.
Cross-border mergers and acquisitions rose 14% to US$443 billion but remained below the average of the past decade.
“Deals are increasingly shifting to regional markets amid tighter regulations and geopolitical tensions,” the report says.
International project finance, which is a key source of funding for infrastructure, dropped 26%, continuing a multi-year slump. The least developed countries were hit hardest.
UNCTAD says despite the headline rise in FDI in 2024, there are concerns around declining flows and growing imbalances.
High borrowing costs and exchange rate volatility continue to deter long-term infrastructure investment, especially in the least developed countries.
And multinationals are restructuring supply chains towards Southeast Asia, Eastern Europe, and Central America – a shift that began during the pandemic and is accelerating, UNCTAD’s report adds.
“Too many economies are being left behind not for lack of potential – but because the system still sends capital where it’s easiest, not where it’s needed,” says Grynspan.
“But we can change that. If we align public and private investment with development goals and build trust into the system, domestic and international markets will bring scale, stability and predictability, and today’s volatility can become tomorrow’s opportunity.”
UNCTAD supports developing countries to access the benefits of a globalised economy more fairly and effectively. It seeks to equip them to deal with the potential drawbacks of greater economic integration. To do this, UNCTAD provides analysis, facilitates consensus-building, and offers technical assistance.
In 2024, the United Nations Conference on Trade and Development rebranded as UN Trade and Development, adopting a clearer and more impactful visual identity to better communicate our work and values to global audiences.
Write to Adam Orlando at Mining.com.au
Images: UNCTAD
