Global investment decline may worsen due to tariffs, UN trade agency warns
Global foreign direct investment (FDI) declined for the second year in a row in 2024, and projections for 2025 indicate even grimmer prospects, according to a new report from the United Nations Conference on Trade and Development (UNCTAD). The report highlights that actual productive investment activity dropped by 11%, underscoring growing investor uncertainty in the face of geopolitical and trade tensions. These figures exclude several European conduit economies, which often serve as transit points for capital rather than destinations for meaningful economic activity.
UNCTAD’s Secretary-General, Rebeca Grynspan, labeled geopolitical tensions and trade fragmentation as detrimental forces weakening investor confidence. She warned that 2025 could be even worse than 2024, as short-term risk management strategies now dominate over long-term growth investments. Tariffs, in particular, were cited as a major hindrance to global growth and investment flow. Early data from the first quarter of 2025 has already shown a record low in new deals and projects.
While the inclusion of European conduit economies shows a 4% rise in global FDI to $1.5 trillion, UNCTAD cautioned that this growth is misleading. Much of this capital merely passes through intermediary financial hubs without contributing to real economic development. “We see a very worrying tendency,” Grynspan said, highlighting the drop in investments that directly impact jobs, infrastructure, and long-term productivity.
The report also reveals a dramatic 58% decline in investment in developed European economies. Conversely, North America witnessed a 23% rise in FDI, with the United States leading this recovery. Southeast Asia also experienced a 10% increase in investment, reaching a near-record $225 billion. These regional contrasts point to a shifting investment landscape influenced by geopolitical alliances and supply chain realignments.
Despite stable overall inflows in many developing economies, UNCTAD expressed concern that critical sectors such as infrastructure, energy, and technology are not receiving adequate capital injection. This signals a growing disconnect between investment figures and their real-world economic benefits, raising alarms over global economic resilience and job creation as protectionist policies continue to rise.
Source: Reuters