In a report released today, Monday, the World Bank revealed that foreign direct investment flows to developing countries have fallen to their lowest levels since 2005, amid rising trade barriers and investment restrictions.
According to the report, the value of these investments did not exceed $435 billion in 2023, the latest year for which complete data is available, according to the World Bank based in Washington, which pointed out that this decline reflects a troubling shift in global economic policies, especially with rising levels of public debt in many countries.
Indermit Gill, Chief Economist at the World Bank, said: "What we are witnessing is a direct result of public policies; while investments are declining, public debts continue to rise to record levels," adding: "In recent years, governments have focused on imposing barriers to investment and trade, while they should have been removing them."
According to the report, the ratio of foreign direct investment to the GDP of developing countries was only 2.3% in 2023, which is half the ratio that peaked in 2008.
For his part, Aihan Kose, Deputy Chief Economist at the World Bank, emphasized that reversing this trend is "essential for creating jobs, achieving sustainable growth, and reaching broader development goals."
The Bank confirmed that foreign investment is a major driver of economic growth; however, the number of investment agreements—which are a key catalyst for the flow of funds—has also significantly decreased, as only 380 agreements came into force between 2010 and 2024, compared to 870 agreements in the period from 2000 to 2009.
The report noted that "the uncertainty in global economic policies and geopolitical risks has reached its highest levels since the turn of the century."
It is noted that foreign investments tend to concentrate in a limited number of large economies, with only ten countries accounting for two-thirds of foreign investments directed to developing countries between 2012 and 2023, with China, India, and Brazil at the forefront, collectively receiving about half of those investments.
In contrast, the 26 poorest countries received no more than 2% of total foreign direct investment flows, according to the report.
The World Bank called for enhancing global cooperation to direct financing towards developing economies suffering from the largest investment gaps, warning that the continuation of this decline could undermine growth and development opportunities for decades to come.