Foreign direct investment (FDI) into developing nations has dropped to its lowest point in nearly two decades, the World Bank revealed in a report released Monday, attributing the decline to rising global trade and investment barriers.
In 2023, developing economies attracted just $435 billion in FDI, marking the weakest inflow since 2005, according to the Washington-based institution.
The report further noted that FDI inflows accounted for only 2.3% of GDP in these countries last year—roughly half of what was recorded at their peak in 2008—signaling a sharp contraction in global investor confidence and capital mobility across emerging markets.
“What we’re seeing is a result of public policy,” said World Bank chief economist Indermit Gill, noting that investment is falling while public debt is reaching new highs.
“In recent years, governments have been busy erecting barriers to investment and trade when they should be deliberately taking them down,” he added in a statement.
Reversing this slowdown is “essential for job creation, sustained growth, and achieving broader development goals,” urged World Bank deputy chief economist Ayhan Kose.
The bank stressed that FDI can be a strong boost to economic growth.
But investment treaties, a catalyst for investment flows, have also fallen in numbers.
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Between 2010 and 2024, just 380 new investment treaties came into force — less than half the number between 2000 and 2009, when around 870 pacts took effect — the World Bank report found.
“Global economic policy uncertainty and geopolitical risk have soared to the highest level since the turn of the century,” the report noted.
The World Bank report also highlighted a stark imbalance in the distribution of foreign direct investment, noting that FDI remains heavily concentrated in larger, more economically advanced developing countries.
Between 2012 and 2023, two-thirds of all FDI directed to developing economies flowed into just 10 countries—with China, India, and Brazil alone accounting for nearly half of the total inflows to emerging markets and developing nations.
In sharp contrast, the 26 poorest countries received a mere two percent of global FDI during the same period, underscoring the persistent disparities in capital access.
In response, the World Bank called for enhanced international collaboration to better channel investment into regions facing the greatest developmental and infrastructure financing needs.