Project finance plummets in 2024, greenfield FDI remains weak and M&A is stable: UNCTAD report

[Image: Unsplash]

FDI to developing countries declined 2% in 2024, marking a second consecutive annual fall for the Global South, which UNCTAD warned will hinder progress on the Sustainable Development Goals (SDGs) as they rely heavily on international project finance. Investments in SDG-related sectors dropped 11% globally in 2024, with fewer projects in agrifood systems, infrastructure, and water and sanitation compared to 2015, when the goals were adopted.

UNCTAD predicts that FDI is expected to grow moderately in 2025, driven by improved financing conditions and increased mergers and acquisitions (M&A) activity, while cautioning that risks and investor uncertainty remain high.

Global FDI trends reveal a mixed landscape. Greenfield projects dropped 8% in number and 7% in value, though sectors like semiconductors and AI helped maintain near-record investment values. International project finance, dominated by infrastructure, declined sharply with deals falling 26% and values dropping nearly a third. Cross-border M&A deals dipped 13% in volume, but their total value rose 2%, signaling a potential recovery.

In developed economies, FDI in Europe fell 45%, with significant declines in Germany, Italy, and France. North America experienced a 13% FDI increase, driven by a surge in US M&A values and greenfield megaprojects in semiconductors. In contrast, developing economies saw mixed results. Asia’s FDI dropped 7%, with China’s inflows plummeting 29%, but India and ASEAN recorded gains. Africa’s FDI surged 84%, driven by a major project in Egypt, while Latin America saw a 9% decline, though some countries showed growth in greenfield investments.

The overall trend underscores the importance of mega-projects, particularly in semiconductors, as a driving force in certain regions, while infrastructure project finance and greenfield investments remain areas of concern globally.