Global foreign direct investment (FDI) saw a decline in 2023 due to increasing geopolitical tensions and a slowing global economy
In 2023, global foreign direct investment (FDI) decreased by 2 percent to US$1.3 trillion, according to the latest World Investment Report released by the United Nations Conference on Trade and Development (UNCTAD) on June 20. Excluding the impact of a few exceptions, the report reveals a sharper decline of over 10 percent in global foreign investments for the second consecutive year, driven by increasing trade and geopolitical tensions in a slowing global economy.
The prospects for FDI in 2024 remain challenging, but the report notes that “modest growth for the full year appears possible” due to easing financial conditions and concerted efforts towards investment facilitation, which have become prominent features of national policies and international agreements. Efforts to attract and retain financial flows have led to the proliferation of online information portals and single windows to foster a conducive business and investment climate.
For developing countries, digitalization offers a technical solution and a stepping stone for wider digital government implementation, addressing underlying weaknesses in governance and institutions that often hinder investment. “Investment is not just about capital flows; it is about human potential, environmental stewardship, and the enduring pursuit of a more equitable and sustainable world,” said UNCTAD Secretary-General Rebeca Grynspan.
FDI flows to developing countries fell by 7 percent to US$867 billion last year, with an 8 percent decrease in developing Asia. Africa saw a 3 percent dip, and Latin America and the Caribbean experienced a 1 percent decline.
On the other hand, flows to developed countries were strongly affected by financial transactions of multinational enterprises, partly due to efforts to implement a global minimum tax rate on the profits of these corporations. Inflows to most parts of Europe and North America were down by 14 percent and 5 percent, respectively.
With tight financing conditions in 2023, the number of international project finance deals—crucial for funding infrastructure and public services such as power and renewable energy—fell by a quarter. This triggered a 10 percent reduction in investment in sectors linked to the Sustainable Development Goals (SDGs), most notably impacting agri-food systems, and water and sanitation. These sectors registered fewer internationally financed projects in 2023 than in 2015 when the goals were adopted.
