Global foreign direct investment (FDI) declined 3% in the first half of 2025, continuing a two-year downward trend as trade tensions, elevated interest rates and geopolitical uncertainty limited investor confidence, according to the UN Conference on Trade and Development (UNCTAD). The contraction was led by developed economies, where cross-border mergers and acquisitions (M&As) fell 18% to 173 billion dollars.
FDI inflows to developing economies were stable overall, but regional performance varied. Investment increased by 12% in Latin America and the Caribbean and by 7% in developing Asia, while Africa recorded a 42% drop.
High borrowing costs and weak economic sentiment affected investment in both industrial and infrastructure sectors. The number of greenfield projects—new overseas business operations—fell 17%, driven by a 29% fall in supply-chain-intensive manufacturing, including textiles, electronics and automotive industries. International project finance, a major source of infrastructure funding, declined 11% in number and 8% in value.
Developing economies experienced a smaller decline in project finance activity, down 2% in number but up 21% in total value due to large-scale projects in Panama, the United Arab Emirates and Uzbekistan.
Despite the overall slowdown, UNCTAD reported growth in investment related to artificial intelligence (AI) and digital technologies. The value of global greenfield investment rose 7%, supported by large AI-focused projects. The United States attracted 237 billion dollars in new greenfield projects during the first half of 2025, with more than half concentrated in AI-related sectors such as semiconductors and data centres.
Investment in sectors linked to the Sustainable Development Goals (SDGs) continued to fall. In developing countries, SDG-related projects declined by 10% in number and 7% in value compared with early 2024. Least developed countries (LDCs) saw projects fall another 5%, potentially reaching their lowest level since 2015.
Infrastructure investment in developing economies remained subdued, with project finance volumes about 25% below the decade average. In LDCs, infrastructure finance fell 85% in value. Greenfield infrastructure investment dropped 31% in value and 25% in number, mainly due to contractions in Latin America and the Caribbean.
Renewable energy investment also weakened. International project finance in the sector fell 9% in number and 10% in value globally, while greenfield renewable projects declined 55% in number and 21% in value. In developing economies, renewable energy projects were down 23%, and in LDCs, 31% in number and 18% in value. Investment in water and sanitation fell 40%, with no new projects recorded in Africa or LDCs.
Only agrifood systems and health saw improvements in developing economies, with agrifood investment remaining stable and health sector investment rising 37%, mainly due to projects in Asia.
UNCTAD expects the global investment environment to remain constrained through the remainder of 2025. Ongoing geopolitical tensions, regional conflicts and efforts to restructure supply chains continue to weigh on investor sentiment. However, the organisation noted that easing financial conditions, a pickup in M&A activity in the third quarter and increased spending by sovereign wealth funds could support a modest rebound by year-end.
