Fact of the Week: FDI to Developing Nations Has Dropped to Its Lowest Level Since 2005

Source: The World Bank Group, “FDI Flows to Developing Economies Drop to Lowest Level Since 2005,” press release, June 16, 2025.

Commentary: Foreign direct investment (FDI) is a powerful tool for driving economic growth in developing nations; it drives job creation, sustained growth, and cross-border economic partnerships. In fact, a 10 percent increase in FDI inflows can generate up to a 0.8 percent increase in real GDP after three years. Yet, over the past several years, FDI to developing countries has shrunk to its lowest level since 2005, with just $435 billion in FDI being distributed in 2023, the most recent year data is available. As a share of their GDP in total, FDI flows to developing countries were about 2.3 percent, half the high seen in 2008. There has also been a decline in FDI flows to high-income nations, with flows reaching $336 billion in 2023, the lowest level since 1996. The slowdown in FDI is likely to continue as global economic growth is projected to slow and trade barriers have increased in 2025.