Global FDI into Developing Nations Hits 18-Year Low Amid Rising Trade Barriers, Says World Bank

Foreign direct investment (FDI) into developing countries dropped to just $435 billion in 2023 — the lowest level since 2005 — as global trade tensions, geopolitical instability, and increasing economic fragmentation undermined cross-border capital flows, the World Bank said in its latest Global Economic Prospects report.

FDI into advanced economies fared no better, plunging to $336 billion, a figure not seen since 1996. The global retreat in foreign investment reflects widespread uncertainty and shifting priorities as governments tighten controls and focus inward amid rising public debt.

Indermit Gill, the World Bank’s chief economist, attributed the decline to policy choices. “It’s not a coincidence that FDI is plumbing new lows at the same time that public debt is reaching record highs,” he said. “Governments have been busy erecting barriers to investment and trade when they should be taking them down.”

The report warned that the drop in FDI inflows to developing nations — now accounting for just 2.3% of their combined GDP, half of its 2008 peak — poses a major challenge for future growth, job creation, and development goals.

Between 2012 and 2023, two-thirds of all FDI into developing economies was concentrated in 10 markets, led by China, which received nearly one-third of all flows. Brazil and India followed with 10% and 6% shares respectively. Advanced economies, particularly from the EU and the U.S., contributed around 90% of the total investment into emerging markets during this period.

Despite the global slowdown, Saudi Arabia posted strong gains. According to the General Authority for Statistics, the Kingdom saw net FDI inflows of SAR 22.1 billion ($5.89 billion) in Q4 2024 — up 26% from the previous quarter. Riyadh aims to attract $100 billion annually in FDI by 2030 as part of its economic diversification strategy under Vision 2030.

The World Bank urged governments to take immediate action to reverse the FDI decline. Recommendations include easing restrictions, improving institutional frameworks, enhancing human capital, and promoting trade integration. “Reversing this slowdown is not just an economic imperative — it’s essential for sustained growth,” said Ayhan Kose, deputy chief economist at the World Bank.

Saudi Arabia has already enacted reforms to improve its investment climate, including a new investment law in August 2024 that streamlines processes and strengthens investor protections. The country’s efforts were recognized in Kearney’s 2025 FDI Confidence Index, where it rose to 13th globally and retained its rank as the third-most attractive emerging market.

With mounting pressure on private investment to drive global growth, the World Bank stressed the need for international cooperation to ensure FDI flows to regions most in need.