GLOBAL foreign direct investment (FDI) flows are expected to post moderate growth this year, driven by strong economic prospects in the US and the European Union (EU), according to the United Nations Conference on Trade and Development (UNCTAD).
In its Global Investment Trends Monitor, UNCTAD said that it is “cautiously optimistic” about global FDI growth this year.
“Looking to 2025, moderate FDI growth is expected, supported by improved financing conditions and renewed M&A (mergers and acquisitions) activity. However, risks and uncertainties — including geopolitical tensions and global economic instability — pose significant challenges,” it said.
In 2024, global FDI flows grew 11% to $1.4 trillion. However, flows dropped 8% when financial flows through European conduit economies are excluded.
“Greenfield project announcements, primarily in industrial sectors, saw a moderate decline of 8% in number and 7% in value,” UNCTAD said.
“Despite the drop, the value of greenfield projects remained high, second only to the record reached in 2023, driven by large-scale investments in semiconductor manufacturing and AI technologies,” it added.
UNCTAD said that it expects FDI flows to grow more rapidly in the US due to strong economic growth prospects and in the European Union, which currently has very low levels of investment.
According to the report, North America posted a 13% rise in FDI in 2024 due to an 80% increase in M&A, while FDI in Europe fell 45% with 18 out of 27 EU countries seeing drops.
Meanwhile, UNCTAD said that regions that are well connected to major developed markets could benefit from global supply chain restructuring.
These include ASEAN, Eastern Europe, West Asia, North Africa, and parts of Central America.
ASEAN posted 2% growth in FDI last year to $235 billion. This is a record for the 10-economy bloc.
Asia had a 7% decline in FDI, Latin America and the Caribbean a 9% drop, and Africa an 89% jump to $94 billion.
“The continued decline in greenfield investments and international project finance underscores the need for robust, diversified strategies to attract and sustain investment, especially in sectors critical for sustainable development,” UNCTAD said.
“For both developed and developing economies, the stakes are high as they navigate this complex landscape,” it added. — Justine Irish D. Tabile