Foreign Direct Investment Hits Lowest Level Since 2005, Says World Bank

The World Bank has warned that foreign direct investment (FDI) into developing economies is at its lowest level since 2005, citing growing trade and investment barriers.

According to a report released by the Washington-based lender on Monday, FDI flows to developing economies received just $435 billion in 2023, down from a peak of 2.3 percent of gross domestic product (GDP) in 2008.

The country with the largest portion of FDI was China, which alone received over $200 billion of investment between 2012 and 2023. India and Brazil also dominated the market, jointly receiving almost half of total FDI inflows to emerging markets and developing economies.

However, the World Bank's chief economist Indermit Gill attributed the decline in FDI to increasing public debt levels, noting that governments "have been busy erecting barriers to investment and trade when they should be deliberately taking them down".

Gill emphasized that reversing this slowdown is essential for job creation, sustained growth, and achieving broader development goals.

World Bank deputy chief economist Ayhan Kose also stressed the importance of investing in FDI, saying it can be a strong boost to economic growth. However, he noted that investment treaties have fallen by half since 2000, with just 380 new treaties coming into effect between 2010 and 2024.

The report warned that global economic policy uncertainty and geopolitical risk have soared to the highest level since the turn of the century.

Only two-thirds of FDI flows went to just 10 countries, while the 26 poorest countries received only "barely two percent of the total" investment. The World Bank called for stronger global cooperation to direct funding towards developing economies with the biggest investment gaps.

As FDI continues to decline, experts warn that it will have significant implications for economic growth and development in developing countries.