Global Foreign Direct Investment Sees Major Upsurge in 2025
The landscape of global foreign direct investment (FDI) witnessed a notable uplift, increasing by 14% in 2025 to reach $1.6 trillion. This resurgence marks a significant rebound following two consecutive years of decline. However, the United Nations Trade and Development (UNCTAD) emphasized that this increase was primarily fueled by financial flows channeled through investment hubs, rather than a rise in new productive projects.
Surge in Financial Flows
A substantial portion of this growth—over $140 billion—originated from what are known as conduit flows via global financial centers. This indicates that the actual underlying investment activity saw a modest increase of approximately 5%. The latest Global Investment Trends Monitor report by UNCTAD illustrates the complexities behind this recovery, revealing that while the headline numbers present a positive picture, the real economic activity behind these figures remains less robust.
Disparities Between Developed and Developing Economies
The FDI landscape shows stark contrasts between developed and developing nations. Flows to developed economies surged by an astounding 43% to $728 billion, with Europe leading this charge. Conversely, FDI flows to developing economies experienced a slight decline of 2%, bringing the total to $877 billion. This widening gap raises concerns, particularly as three-quarters of the world’s least developed countries reported stagnant or decreasing inflows.
Signs of Caution in the Market
Despite an outwardly positive growth figure, UNCTAD cautioned that it obscures deeper issues. Key indicators linked to actual economic activity remain weak. The value of cross-border mergers and acquisitions fell by 10% in 2025, marking a downturn. Additionally, international project finance continued its decline for the fourth year running, and there was a 16% drop in the number of new greenfield project announcements—projects indicating long-term investment.
Concentration in Capital-Intensive Sectors
The investment landscape is increasingly polarized, with capital-intensive sectors emerging as hotspots. Notably, data centers accounted for more than one-fifth of global greenfield investments, exceeding $270 billion in value. Investment in semiconductor projects rose sharply by 35%, signifying a robust interest in advanced technology sectors, while traditional sectors, such as textiles, electronics, and machinery, saw significant investment declines.
Major Investments from Gulf-Linked Investors
Investors from the Gulf region have also made significant plays in technology projects. For instance, MGX, supported by the United Arab Emirates, announced a groundbreaking $43 billion investment to construct a cutting-edge AI campus in France. This project stands out as one of the largest greenfield initiatives globally in 2025. Additionally, Saudi Arabia is among a select group of high-income economies in Asia that recorded increased FDI inflows during the year.
Declining Infrastructure Investment
In contrast to the overall FDI increases, international infrastructure investment took a hit, showing signs of further weakening. In particular, the values of renewable energy projects fell by 28%, as investors began to reassess associated revenue risks and navigational uncertainties in regulatory climates. The international project finance landscape dropped to levels not seen since 2019, raising alarm for nations that depend on foreign capital for major infrastructure projects.
Future Outlook for FDI
Looking ahead, UNCTAD suggests that FDI flows could see a modest increase in 2026, contingent on the easing of borrowing costs and a revival in merger activities. However, the report also warned that genuine investment activity is likely to remain lackluster due to ongoing geopolitical tensions, policy unpredictability, and economic fragmentation.
In this context, UNCTAD called for a concerted effort to focus on productive, development-oriented investments rather than merely increasing financial flows. Without collaborative action, the risk is that global investments will continue to concentrate disproportionately in a limited number of regions and sectors, potentially stifling broader economic development.
