Global foreign direct investment (FDI) fell 3% in the first half of 2025, extending a two-year slump as trade tensions, high interest rates and geopolitical uncertainty kept investors cautious, UN Trade and Development (UNCTAD) said in its latest Global Investment Trends Monitor.
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 – fell 18% to $173 billion.
Developing economies fared better overall, with flows remaining flat. But trends diverged by region. Inflows rose 12% in Latin America and the Caribbean and 7% in developing countries in Asia but fell 42% in Africa.
Infrastructure and manufacturing take a hit
High borrowing costs and economic uncertainty continued to squeeze investment in industry and infrastructure in the first half of 2025.
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 automotives, amid tariff uncertainty.
International project finance – critical for infrastructure development – also declined, with deal numbers down 11% and value 8%.
The trend was more positive in developing economies, where project finance deals fell only 2% after two years of sharp declines. Despite fewer deals, the total value jumped 21%, lifted by a few large-scale projects in Panama, the United Arab Emirates and Uzbekistan. A broad recovery has yet to emerge.
Bright spot: AI fuels new investment
Despite fewer projects, the value of global greenfield investment rose 7%, lifted by major projects in artificial intelligence (AI) and the digital economy.
For example, the United States recorded $237 billion in new greenfield projects in the first half of 2025 – nearly matching the 2024 total and four times the past decade’s half-year average. More than half of the value came from AI-related sectors, particularly semiconductors ($103 billion) and data centres ($27 billion).
Sustainable development investment weakens further
Investment in sectors critical to the Sustainable Development Goals (SDGs) continued to fall in early 2025. SDG-related investment projects in developing countries were down 10% in number and 7% in value in early 2025, following steep declines last year.
Investment in infrastructure remained weak in developing economies.
- Internationally financed projects – including in transport and utilities – remained about 25% below the decade average.
- In LDCs, project finance in infrastructure fell another 85% in value.
- Greenfield infrastructure activity declined 31% in value and 25% in number, led by sharp contractions in Latin America and the Caribbean (-78% in value and -43% in number).
Renewable energy investment, the largest SDG-relevant sector, also weakened.
- Globally, international project finance in the sector – which has accounted for nearly two thirds of global totals in recent years – fell another 9% in number and 10% in value.
- Global greenfield projects in renewable energy also declined 55% in number and 21% in value. In developing economies, projects fell 23%. In LDCs, they declined by 31% in number and 18% in value.
Investment in water and sanitation fell 40%, with no new projects in Africa or LDCs and a 97% decrease in Latin America and the Caribbean.
Only agrifood systems and health showed positive trends in developing economies, with investment holding steady in agrifood and rising 37% in health, driven primarily by new projects in Asia.
Outlook: persistent headwinds
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.
Still, 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.
