A United Nations agency report released on Thursday reveals that global foreign direct investment (FDI) saw a second consecutive annual decline in 2024, and the outlook for 2025 is even more concerning due to escalating trade tensions.
According to the United Nations Conference on Trade and Development (UNCTAD), FDI transactions, excluding certain European intermediary economies, dropped by 11%. This indicates a significant reduction in actual productive investments. UNCTAD Secretary-General Rebeca Grynspan stated that geopolitical tensions and trade fragmentation fueled this decline by creating uncertainty, which she referred to as “poison” for investor confidence.
Grynspan expressed further worry for 2025, noting that investment seems to have stalled and tariffs are negatively impacting growth. This situation is leading businesses to prioritize short-term risk management over long-term investments. UNCTAD’s negative forecast for international investment in 2025 is supported by early first-quarter data showing record low deal and project activity.
While overall FDI, including the European intermediary economies, showed a 4% increase to $1.5 trillion, UNCTAD clarified that this figure is misleading. Much of this investment merely passed through these hubs and did not translate into productive, job-creating ventures. Grynspan highlighted this “very worrying tendency,” emphasizing that investments with a real impact on jobs and infrastructure are decreasing.
Developed economies experienced a sharp drop in investment, with Europe seeing a 58% decrease. In contrast, North America recorded a 23% increase in FDI, primarily driven by the U.S., and Southeast Asian countries achieved their second-highest FDI level on record with a 10% rise, reaching $225 billion. Although capital inflows in developing countries remained generally stable, UNCTAD observed that these funds were not being directed into critical job-creating sectors such as infrastructure, energy, and technology.
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