Washington: Foreign direct investment (FDI) flows to emerging economies plummeted to $435 billion in 2023, marking the lowest level since 2005, as reported by the World Bank. This decline occurs against a backdrop of increasing trade and investment barriers, which the World Bank warns pose a significant threat to global efforts aimed at financing development.

According to Anadolu Agency, the World Bank highlighted a concurrent slowdown in investment flows to advanced economies, with high-income countries receiving a mere $336 billion in 2023, the lowest since 1996. This decline in FDI as a percentage of GDP in developing economies was stark, at just 2.3%, about half of what was recorded during the peak year of 2008.

The World Bank's analysis revealed that only 380 new investment agreements were put into effect between 2010 and 2024, a sharp drop to one-third of the levels seen in the 1990s. Additionally, the number of new trade agreements has halved in the last decade, from an average of 11 per year in the 2010s to just 6 per year in the 2020s.

The World Bank's statement underscored that foreign investments, under suitable conditions, are a crucial source of economic growth. However, these investments remain concentrated in the largest economies. From 2012 to 2023, just 10 countries accounted for about two-thirds of international direct investment in emerging markets, with China receiving nearly one-third, Brazil 10%, and India 6%.

The World Bank emphasized the necessity of policy adjustments to ease investment restrictions and achieve development goals. Indermit Gill, the World Bank Group's chief economist and senior vice president, noted that the current FDI trends result from public policy, coinciding with soaring public debt levels.

Ayhan Kose, the World Bank Group's deputy chief economist and director of the prospects group, expressed concern over the FDI downturn. He urged urgent action as the global community prepares for the Conference on Financing for Development. Kose emphasized the need for bold domestic reforms and decisive global cooperation to reinvigorate cross-border investments, essential for job creation, sustained growth, and broader development objectives.