Global foreign direct investment grew 3% in 2023 as recession fears eased

Global foreign direct investment growth. Image credit: Unsplash/Mathieu Stern

New UNCTAD analysis shows global FDI trends defied earlier expectations but highlights that growth was driven by a few European “conduit” economies and raises concerns about the decline in international investment projects.

Global foreign direct investment (FDI) defied earlier expectations for 2023, growing by 3% and finishing the year at an estimated $1.37 trillion, according to UNCTAD’s latest Global Investment Trends Monitor published on January 17.

However, the report highlights a key nuance – the overall uptick was driven mainly by a few European “conduit” economies, which often act as intermediaries for FDI destined for other nations.

Strikingly, when these conduit economies are excluded, global FDI flows show a steep 18% decline in 2023. The rest of the European Union recorded a steep 23% decline, and the United States, the world’s leading FDI recipient, saw a 3% dip.

The UNCTAD report also underscores a worrying decline in international investment project announcements last year, especially in project finance and M&As, which declined 21% and 16%, respectively. Meanwhile, greenfield project announcements dipped by 6% in number but grew by 6% in value, bolstered in part by manufacturing.

Looking ahead, the report says “a modest increase in FDI flows in 2024 appears possible”, citing stabilization for inflation and borrowing costs in major markets.

But it warns that significant risks persist, including geopolitical tensions, mounting debt in many countries and concerns about further global economic fragmentation.