FDI flows to developing economies drop to lowest level since 2005

High trade and investment barriers pose threat to mobilising financing for development, says World Bank

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FLOWS of Foreign Direct Investment (FDI) into developing economies—a key propellant of economic growth and higher living standards—have dwindled to the lowest level since 2005 amid rising trade and investment barriers, new research from the World Bank shows. These barriers pose a significant threat to global efforts to mobilise financing for development.

In 2023, the latest year for which data are available, developing economies received just $ 435 billion in FDI—the lowest level since 2005. That coincides with a global trend in which FDI flows into advanced economies have also slowed to a trickle: high-income economies received just $ 336 billion in 2023, the lowest level since 1996. As a share of their GDP, FDI inflows to developing economies in 2023 were just 2.3%, about half the number during the peak year of 2008.

“What we are seeing is a result of public policy,” said World Bank Group Chief Economist and Senior Vice President Indermit Gill. “It is not a coincidence that FDI is plumbing new lows at the same time that public debt is reaching record highs. Private investment will now have to power economic growth, and FDI happens to be one of the most productive forms of private investment. Yet, in recent years governments have been busy erecting barriers to investment and trade when they should be deliberately taking them down. They will have to ditch that bad habit.”