Global foreign direct investments (FDIs) fell 3% during the first half of 2025, amid trade tensions, geopolitical risks, high interest rates and regional conflicts, according to a recent report by the U.N. Trade and Development (UNCTAD).
It said the drop was driven by developed economies, where cross-border mergers and acquisitions (M&As), which normally make up a large share of their FDI, dropped 18% to $173 billion.
Developing economies still fared better overall, with flows remaining flat, but trends diverged by region, the UNCTAD said. It suggested that inflows rose by 12% in Latin America and the Caribbean and by 7% in developing countries in Asia. They fell 42% in Africa.
"High borrowing costs and economic uncertainty continued to squeeze investment in industry and infrastructure in the first half of 2025," UNCTAD said in its assessment from Oct. 31.
"Announcements of greenfield projects – when firms build new operations abroad – fell 17% in number, driven by a 29% decline in supply-chain-intensive manufacturing such as textiles, electronics and automotive, amid tariff uncertainty," it added.
It also said that international project finance – critical for infrastructure development – also posted a decrease, with deal numbers down 11% and value 8%.
The report showed that despite fewer projects, the value of global greenfield investment rose 7%, propelled by major projects in artificial intelligence (AI) and the digital economy.
It also pointed out that the global investment climate will remain challenging through the rest of 2025. "Geopolitical tensions, regional conflicts, economic fragmentation and efforts to de-risk supply chains continue to weigh on flows," it added.
However, the UNCTAD said that easing financial conditions, rising M&A activity in the third quarter and higher overseas spending by sovereign wealth funds could support a modest rebound by year-end.
