World Bank: Foreign Direct Investment in Developing Countries Falls to Lowest Level Since 2005

Foreign direct investment (FDI) into developing economies has plummeted to its lowest level in nearly two decades, the World Bank revealed in a report released Monday, warning that rising trade barriers and policy uncertainty are choking off much-needed capital flows.

According to the report, developing countries attracted only $435 billion in FDI in 2023, the lowest level since 2005 and the latest year for which data is available. As a share of gross domestic product (GDP), FDI into these economies fell to 2.3 percent — barely half of its peak in 2008.

“This is the result of public policy,” said World Bank Chief Economist Indermit Gill. “In recent years, governments have been busy erecting barriers to investment and trade when they should be deliberately taking them down.”

The World Bank emphasized that reversing this trend is vital for job creation, long-term growth, and broader development goals. “FDI plays a critical role in boosting productivity and income levels,” said Deputy Chief Economist Ayhan Kose, who called for urgent action to re-open investment channels.

The report highlights several worrying trends, including a steep decline in the number of investment treaties. Only 380 new investment agreements came into effect globally between 2010 and 2024 — less than half the 870 treaties signed between 2000 and 2009.

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Adding to investor hesitation are rising global tensions and economic uncertainty. “Policy uncertainty and geopolitical risk have soared to the highest levels since the turn of the century,” the report warned.

FDI flows remain highly concentrated, with two-thirds of all investment between 2012 and 2023 going to just 10 developing countries. China, India, and Brazil alone accounted for nearly half of all FDI to emerging and developing markets. In stark contrast, the world’s 26 poorest nations received less than two percent of total FDI inflows during the same period.

The World Bank called for stronger global cooperation to close investment gaps in the most underfunded regions, arguing that directing capital to where it’s most needed will be essential for reducing inequality and driving sustainable growth.