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Global FDI Trends • Project Finance Crisis • Sustainable Development Goals • UNCTAD 2024 Report • Investment Outlook

FDI Drops by 8% in 2024: A Wake-Up Call for Global Development and SDG Goals

Foreign direct investment (FDI), a critical engine for economic growth and sustainable development, witnessed a sharp decline of 8% in 2024, according to the latest report by the United Nations Conference on Trade and Development (UNCTAD). This downtrend poses serious implications for developing economies and threatens progress towards achieving the Sustainable Development Goals (SDGs).

📉 Understanding the FDI Decline

• Global FDI flows shrank significantly, reflecting growing uncertainty in global markets.
• International project finance—a key FDI component—plummeted by 26% in deal numbers and nearly one-third in value.
• Developed economies recorded a 29% drop, while developing economies saw a 23% reduction in deal numbers and a 33% decline in investment value.

🏗️ Infrastructure and Renewable Energy Take a Hit

• Infrastructure finance declined by 31% in deal count and 26% in value, marking a major setback for growth initiatives.
• The previously surging renewable energy sector also slowed down, with a 16% fall in both the number and value of project finance deals.
• Regions hit hardest include North America, developing Asia, and Latin America.

🌱 Impact on Sustainable Development Goals (SDGs)

• Investments related to SDG sectors dropped by 11% in 2024.
• While renewable energy and health saw modest gains, critical sectors like agrifood systems, infrastructure, and sanitation fell below even 2015 levels—the year SDGs were adopted.
• This jeopardises global targets, particularly in developing countries that rely heavily on foreign finance.

🧭 What Drives FDI—and What’s Holding It Back?

Key determinants of foreign direct investment include:

• Policy stability and transparent regulations
• Investor protection standards and treatment parity
• International trade agreements and privatisation initiatives
• Robust infrastructure and ease of doing business

A weak or volatile environment can deter capital inflows, especially in sectors needing long-term commitment.

🔮 Looking Ahead: 2025 Outlook and the Need for Reform

• Moderate growth in FDI is projected for 2025, buoyed by potential improvements in global financing conditions.
• However, geopolitical risks, interest rate volatility, and supply chain realignments will continue to cast a shadow.
• The current decline signals the urgent need for innovative strategies, diversified financing models, and stronger international cooperation to reignite global investment, particularly in green infrastructure and digital transformation.