FDI in Developing Countries Hits Record Low – World Bank Warns

Foreign direct investment (FDI) in developing economies has hit an 18-year low, according to a World Bank report released on Monday.

The Washington-based development lender attributed the decline to growing trade and investment barriers. In 2023, developing countries received a mere $435 billion in FDI, the latest year for which data is available.

As a share of gross domestic product (GDP), FDI flows to developing economies stood at 2.3% in 2023, roughly half the level of their peak in 2008.

World Bank Chief Economist Indermit Gill blamed public policy for the decline, stating, “What we’re seeing is a result of public policy. In recent years, governments have been busy erecting barriers to investment and trade when they should be deliberately taking them down.”

World Bank Deputy Chief Economist Ayhan Kose emphasized the need to reverse this trend, saying it is “essential for job creation, sustained growth, and achieving broader development goals.” The bank highlighted that FDI can significantly boost economic growth.

However, the number of investment treaties, which can catalyze investment flows, has also decreased. Between 2010 and 2024, only 380 new investment treaties came into force, less than half the number between 2000 and 2009, when around 870 pacts took effect.

The report noted that “global economic policy uncertainty and geopolitical risk have soared to the highest level since the turn of the century.” FDI tends to be concentrated in larger economies, further exacerbating the issue.

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