Global Foreign Direct Investment (FDI) saw a 3% decline in the first half of 2025, extending a two-year slump, according to the latest Global Investment Trends Monitor released today by UN Trade and Development (UNCTAD). The continued downturn is primarily attributed to persistent trade tensions, high interest rates, and mounting geopolitical uncertainty, which have fostered investor caution worldwide.
The decline was driven largely by developed economies, where cross-border mergers and acquisitions (M&As)—a major component of their FDI—plunged by 18% to $173 billion.
In contrast, developing economies as a group performed better, with total FDI flows remaining flat. However, regional trends showed stark divergence. Inflows rose robustly in Latin America and the Caribbean (up 12%) and developing countries in Asia (up 7%), but flows to Africa dropped sharply, falling by 42%.
Infrastructure and Manufacturing Investment Squeezed
High borrowing costs and economic uncertainty continued to restrict investment in physical assets. Announcements of greenfield projects—the building of new operations abroad—fell 17% in number. This was driven by a significant 29% decline in supply-chain-intensive manufacturing sectors, such as textiles, electronics, and automotive, as firms navigated global tariff uncertainty.
International project finance, crucial for large-scale infrastructure development, also declined globally, with the value of deals falling by 8%. Developing economies showed a slight reprieve in this area; while deal numbers fell 2%, the total value jumped 21% thanks to several large projects in countries like Panama, the United Arab Emirates, and Uzbekistan, though a broad recovery remains elusive.
AI and Digital Economy Emerge as Bright Spot
Despite the overall decline in project numbers, the total value of global greenfield investment rose 7%, entirely uplifted by major projects in Artificial Intelligence (AI) and the digital economy.
This trend was exemplified by the United States, which recorded $237 billion in new greenfield projects in the first half of 2025. More than half of this unprecedented value stemmed from AI-related sectors, particularly semiconductors ($103 billion) and data centres ($27 billion), nearly matching the country’s total greenfield investment for all of 2024.
Sustainable Development Goal (SDG) Investment Reaches Critical Low
The report highlights a deepening crisis in investment for sectors critical to achieving the Sustainable Development Goals (SDGs). SDG-related investment projects in developing countries were down 10% in number and 7% in value in early 2025, following steep declines last year.
Investment in renewable energy, the largest SDG-relevant sector, weakened further globally, with international project finance falling 10% in value. Investment in essential services like water and sanitation plummeted 40%, with no new projects recorded in Africa or the Least Developed Countries (LDCs). Project finance in infrastructure in LDCs fell a devastating 85% in value.
Only agrifood systems and health registered positive trends in developing economies, with health investment rising 37%, largely driven by new projects in Asia.
Outlook: Headwinds Persist with Potential for Modest Rebound
UNCTAD anticipates that the global investment climate will remain challenging through the remainder of 2025, weighed down by geopolitical tensions, economic fragmentation, and ongoing efforts to de-risk supply chains.
However, easing global financial conditions, a recent uptick in M&A activity in the third quarter, and higher overseas spending by sovereign wealth funds could support a modest rebound in FDI flows by the end of the year.
