Global foreign direct investment plummets amid rising uncertainty

In 2024, the global landscape for foreign direct investment (FDI) faced significant challenges, primarily driven by escalating macroeconomic headwinds and growing investor caution. The United Nations Conference on Trade and Development (UNCTAD) reported that, after a minor increase, underlying FDI flows decreased by 11%, marking the second consecutive year of double-digit declines. These troubling trends suggest that the anticipated recovery in FDI following the Covid-19 pandemic has consistently been hindered by multifaceted crises, which include economic fluctuations and geopolitical tensions. Policy risks and uncertainty have emerged as critical impediments to investment. Although there was a noticeable uptick of 14% in cross-border mergers and acquisitions, with a total value of $443 billion, the figure remained under the long-term average. This decline has been compounded by a 26% decrease in international project finance, significant for infrastructure investments, indicating a broader hesitance among investors to engage in long-term, large-scale projects. Moreover, this uncertainty has discouraged efforts to diversify supply chains, as seen in the rapid shifts sought by multinational enterprises. Industries such as semiconductors have become focal points for new investments, attracting substantial funding, with notable projects in the United States and India. However, despite these pockets of activity, the overall sentiment towards FDI remains bleak, surrounded by growing trade tensions and rising barriers, which discourage cooperation and collaboration in global markets. The UNCTAD reports forecast an increasingly grim outlook for international investment prospects into 2025, as the pre-existing concerns continue to shape investment decisions. The findings also acknowledge a transformation in the profiles of large multinational enterprises (MNEs), with tech-oriented and service-based companies like Alphabet, Amazon, and Microsoft gaining larger shares of global investment. This signifies a shift away from traditional manufacturing toward a more service-oriented economy. Still, despite some resilience in sectors tied to supply chain demands, such as electronics and machinery, the prevailing environment in 2025 hints at record low activity in cross-border deals and projects, fundamentally altering investor behavior and commitments across the globe.