The United Nations major body focused on trade and development, UNCTAD, warning that international investment tariffs in 2025 have become negative due to change in global trade policy, including uncertainty.
While there was a slight increase in global investment at the beginning of the year, according to the United Nations Conference on Trade and Development, trade stress has amended the bottom of most indicators of foreign direct investment (FDI). World Investment Report 2025Continued on Thursday. This includes gross domestic product, capital manufacturing, export of goods and services, foreign currency, financial market volatility and investor spirit.
“Taking all these together, they have been modified in high risk, low growth, low investment and forward direction,” from the beginning of this year, “Richard Bolvjan, one of the authors of the report, said,” The head of the investment research branch division on investment and enterprise for UNCTAD. “If we provide us with raw data for these indicators, if we estimate us by IMF, World Bank and other institutions. Are. The expectations of moderate development we could hurry up in the year, now all have disappeared, “he said.
Inversely in -reversal in development, investments fuel by efforts between manufacturers to diversify their supply chains beyond China had a positive tendency of two years, which began during the epidemic.
Bolvjan said, “Companies were continuing looking for new places for production, but now with tariffs, they are all sitting on their hands.” The first quarter data of this year suggests that both M&A market and greenfield announcements (new project construction) are on record climb. “Originally, the M&A market is back to the level of global financial crisis,” he said.
Bolvjan said that even though the situation improves and clarity is provided on tariffs, it would be difficult to overcome the shock of the first six months of the year.
Globally, he said, projects have a risk between $ 100 to $ 200 billion. “All this is not going to disappear overnight, but the projects will be delayed which will make permanently a difference,” he said.
The report stated, “While Tariff has led some investment project announcements aimed at restructuring supply chains in manufacturing sectors, their main impact has been a dramatic increase in investor uncertainty,” the report states. “Early data for the first quarter of 2025 shows record-less activity in projects and projects.”
Cross-border merger and acquisitions remained below the long-term average, “the report stated in the report,” indicating a structural change to domestic and proximal investment strategies amid growing policy risks, regulatory investigations and global uncertainty.
The report showed that global foreign direct investment is contracted for the second consecutive year. The International Project Finance, which at least makes FDI’s highest stake in developed countries, continued its recession in 2024. Infrastructure investment creates a large part of this investment. According to the report, the price of IPF in 2024 was 26 percent lower, which expands a sharp fall from 2023.
The reason for uncertainty on exchange and interest rates was cited behind the impact in the state of financing, at least these funds were required with developed countries. Unctad warned that these countries would be the most affected by the current investment recession.
According to the report, overall, FDI in developing countries was stable in $ 867 billion in 2024, but the spread between the winners and the losers was widespread.
Africa’s foreign direct investment recorded its highest level, with a growth of 75% to $ 97 billion. The lion’s share of that investment came from a single international project finance deal in Egypt by a sovereign investment fund in the United Arab Emirates. Excluding that investment, the flow in Africa for FDI still increased to 12% ($ 64 billion.) Record FDI flow to Asia (ASEAN), up to 10%, up to $ 225 billion.
Foreign direct investment in China, however, slipped.
“In the last 15 years, we have always reported gradual increase in its foreign direct investment [China] But in the last two years, we have seen a decline in the later two years. Last year was 29% below, “Bolvjan said.” If we look at the comparison between the extreme two years ago, it is 40% below, “he said.
Bolvjan said that it is not necessary that companies get out of China in terms of production capacity, but tariffs are affecting their investment decisions. “So where international companies want to expand or build new manufacturing facilities, they will now have to consider that there is a tariff and from the business cost point of view, they will look at places that are the most beneficial,” they explained.
FDI in South America saw a reduction of 18%. India saw a slight 2% decrease. Latin America and Caribbean saw a reduction of 12%, which is largely due to low energy prices in 2024. Brazil, the largest FDI recipient of the region, saw a decrease of 8%.
“Pulback in FDI affects all developing countries and relative opportunities to either enter or expand in the global value chains and of course in manufacturing fields,” Bolvision said. “India depends on foreign direct investment to expand its manufacturing, training and production capacity.”
Structurally weak and weak economies saw a slight increase in FDI. At least developed countries saw an increase of 9% ($ 37 billion), or 2.4% global FDI flow. Landlocked developing countries saw a reduction of 10%, while the developing states of the small island saw an increase of 11%.
Unctad wrote that the “most worrying” decline in FDI was in lined areas with continuous development goals. Investment in energy and gas supply declined by 28%, while the project finance in renewable energy declined by 16%.
The report said, “This trend comes at a time when the world may fall at least. Reversing this negative trend will not only demand a deep alignment of investment flow not only more capital in investment in investment.
The Bolijan said that there has been a huge increase in semiconductor projects including the US and India. Foreign direct investment in digital infrastructure is also increasing. “Digital economy investment is the fastest growing segment worldwide, which includes developing countries,” Bolijan said. “It includes data centers that have seen a big growth,” he said.
But when digital investment is the fastest growing segment in FDI, these are investment assets. “So it can bring us a lower price in terms of FDI on the balance of payment, but it can bring us more projects and good development opportunities for developing countries,” the Bolijan said.
