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Economic growth

Foreign Direct Investment to Developing Economies Hits 20-Year Low

Strategic Insights

— 2 min read

Foreign direct investment (FDI) to developing economies has dwindled to the lowest level since 2005, posing a significant threat to global efforts to mobilise financing for development. According to a 20-year study by Impact News magazine, FDI flows into developing economies have slowed to a trickle due to rising trade and investment barriers. This trend coincides with a global slowdown in FDI flows into advanced economies, where high-income economies received just $336 billion in 2023, the lowest level since 1996.

Key Takeaways:

  • FDI flows into developing economies have dwindled to $435 billion in 2023, the lowest level since 2005, due to rising trade and investment barriers.
  • FDI inflows to developing economies in 2023 were just 2.3 percent of their GDP, about half the number during the peak year of 2008.
  • The World Bank Group's Chief Economist and Senior Vice President, Indermit Gill, warns that private investment will have to power economic growth, and FDI happens to be one of the most productive forms of private investment.
  • The Conference on Financing for Development will be held in Seville, Spain, from June 30 to July 3, 2025, to discuss how to mobilize financing for key global and national development goals.
  • Easing investment restrictions will be a key first step to attract FDI; so far in 2025, half of all FDI-related measures announced by governments in developing economies have been restrictive measures.
  • Investment treaties tend to boost FDI flows between signatory states by more than 40%, but only 380 new investment treaties came into force between 2010 and 2024.
  • Countries that are more open to trade tend to receive more FDI, with an extra 0.6% in FDI for each percentage-point increase in the trade-to-GDP ratio.
  • Between 2012 and 2023, about two-thirds of FDI flows to developing economies went to just 10 countries, with China receiving nearly a third of the total.
  • FDI tends to be concentrated in the largest economies, with the 26 poorest countries receiving barely 2% of the total.

Statistics:

  • In 2023, developing economies received just $435 billion in FDI, the lowest level since 2005.
  • High-income economies received just $336 billion in 2023, the lowest level since 1996.
  • FDI inflows to developing economies in 2023 were just 2.3 percent of their GDP, about half the number during the peak year of 2008.
  • Between 2010 and 2024, just 380 new investment treaties came into force.
  • Countries that are more open to trade tend to receive more FDI, with an extra 0.6% in FDI for each percentage-point increase in the trade-to-GDP ratio.

Sources:

  • Impact News magazine, Washington June 16, 2025
  • World Bank Group, analysis of data from 74 developing economies between 1995 and 2019
  • World Bank Group, 20-year study on FDI flow patterns
  • World Bank Group, World Development Indicators
  • World Bank Group, Prospects Group

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