Developing countries experience 9% decline in foreign direct investment – UNCTAD

This is according to the latest Global Investment Trends Monitor from the United Nations Conference on Trade and Development (UNCTAD).

FDI flows to developing countries fell by 9%, to $841 billion, with declining or stagnating flows in most regions.

Although flows worldwide defied earlier expectations and grew by a marginal 3% in 2023 to an estimated $1.37 trillion, “the headline increase was due largely to higher values in a few European ‘conduit’ economies,” the report says.

Excluding these conduit economies, global FDI flows experienced a significant 18% decline in 2023.

FDI flows to Africa were almost flat at an estimated $48 billion, reflecting a marginal one percent decrease compared to the previous year.

Greenfield project announcements increased, mostly due to strong growth in Morocco, Kenya, and Nigeria. However, project finance deals fell by one third, more than the global average decline, weakening prospects for infrastructure finance flows.

The number of international investment projects announced in developing countries in sectors relevant to the SDGs – including infrastructure, renewables, water and sanitation, food security, health and education – remained flat.

The number of SDG-relevant international project finance deals experienced a 27% decline (40% in value). Conversely, the number of SDG-relevant greenfield projects increased by 12% (6% in value).

The food and agriculture sector saw a marginal rise in project numbers from the low levels of 2022, while most other sectors recorded a decline.

Looking ahead, UNCTAD says a modest increase in FDI flows in 2024 appears possible, as projections for inflation and borrowing costs in major markets indicate a stabilization of financing conditions for international investment deals.

However, significant risks persist, including geopolitical risks, high debt levels accumulated in many countries, and concerns about further global economic fracturing.