Fewer, Bigger, More Strategic: The Narrowing of Global Investment in 2025

Global foreign direct investment (FDI) recovered in 2025 after two years of decline, but the recovery was narrow. Growth was concentrated in developed economies, in a small number of host countries and in a few capital-intensive sectors led by data centres and semiconductors, while renewable energy, infrastructure and trade-exposed manufacturing lost ground. Governments, meanwhile, adopted a record number of investment policy measures, with screening on national-security grounds still spreading. This paper compares UNCTAD's World Investment Report 2026 with the OECD's FDI statistics and assesses what the pattern means for economic security and for developing economies.

Key points

• UNCTAD estimates that global FDI rose by 6% to US$1.6 trillion in 2025, ending two years of decline; excluding conduit flows through major European financial centres, the increase was 4% [1, pp. 3, 5; 2]. The OECD, using a different method, reports a 15% rise to US$1,660 billion, or 6% excluding large fluctuations in selected European economies [3].
• Inflows to developed economies rose by 11% to US$723 billion, against 2% growth to US$901 billion for developing economies; the top 20 host economies received more than 80% of global FDI [1, pp. 6, 9; 2].
• Data centres added US$235 billion to the combined value of announced greenfield projects and international project finance deals, while renewable energy fell by US$37 billion and both non-digital infrastructure and trade-exposed manufacturing fell by US$55 billion [1, p. 41].
• Strategic sectors, including AI infrastructure, semiconductors, critical minerals and energy-transition industries, accounted for 44% of global greenfield project values in 2025, up from 16% in 2020 [2].
• Governments in 104 countries adopted a record 229 investment policy measures in 2025. Fifty-two economies now screen foreign investment on national-security grounds, up from 21 in 2016 [1, pp. 73, 83].

1. The problem

Foreign direct investment is one of the clearest signals of where firms expect future production to take place. A factory, a mine or a data centre built abroad is a long-term commitment that money moving through bond markets is not. FDI therefore tracks the geography of economic power, and of economic security, more closely than most financial data.

On the headline numbers, 2025 brought relief. Both UNCTAD and the OECD record a rise in global FDI after two weak years [1; 3]. Beneath the totals, however, the two institutions describe the same shift: investment is flowing to fewer places, into fewer and larger projects, and increasingly into sectors that governments have defined as strategic.

2. The evidence

A modest recovery, measured two ways. UNCTAD's World Investment Report 2026, released on 7 July 2026 [2], puts global FDI at US$1.6 trillion, up 6% from US$1.5 trillion in 2024 [1, p. 5]. Conduit flows through financial centres and investment hubs subtracted about US$40 billion from the total, compared with US$70 billion in 2024; excluding them, global FDI was about 10% above its 2010–2024 average [1, p. 5]. The OECD's April 2026 FDI in Figures reports a larger rise, 15% to US$1,660 billion, but only 6% once swings in Luxembourg, the Netherlands and a few other European economies are removed [3]. Inside the OECD area, inflows rose by 9% to US$748 billion but fell by 2% on the adjusted basis [3].

The two sources sometimes disagree. UNCTAD records US inflows as broadly stable at US$277 billion and says inflows to China declined [1, p. 9]. The OECD puts US inflows at US$288 billion and reports that flows to China rebounded to US$80 billion, the first increase after three years of decline, driven by intra-company loans [3]. Such differences are likely to reflect different data sources and definitions; neither series should be read alone.

Who gained. Inflows to developed economies rose by 11% to US$723 billion, while developing economies grew by 2% to US$901 billion [1, p. 6; 2]. Among developing economies, inflows to lower-middle-income countries fell by 5% [1, p. 8]. Developing Asia received US$644 billion, Latin America and the Caribbean rose by 14% to US$188 billion, and Africa received about US$70 billion, down from an exceptional US$94 billion in 2024 but still about a third above its 2010–2024 average [1, p. 21; 2]. Inflows to the least developed countries rose by 21% to US$43 billion, yet that is only 2.7% of the global total, concentrated in a few mainly resource-rich economies [2]. In the OECD's data, flows to non-OECD G20 economies rose by 42%; Saudi Arabia's inflows, for example, rose from US$21.3 billion to US$32.6 billion and India's from US$27.1 billion to US$39.1 billion [3].

What was built. The sectoral picture is the most striking feature of the year. Measured by the change in the combined value of announced greenfield projects and international project finance deals between 2024 and 2025, data centres gained US$235 billion, oil and gas US$38 billion and semiconductors US$13 billion. Critical minerals fell by US$5 billion, real estate by US$31 billion, renewable energy by US$37 billion, and both infrastructure (excluding renewables and data centres) and trade-exposed global value chain (GVC) manufacturing by US$55 billion [1, p. 41]. UNCTAD links the weakness in renewables and GVC-intensive manufacturing to tariff restrictions, frequent tariff changes and investor uncertainty [1, p. 40].

Bigger projects. Megaprojects worth US$1 billion or more accounted for about 44% of the value of announced greenfield investment in 2025, up from 22% in 2017 [1, p. 41]. In developed economies, announced greenfield values rose from about US$715 billion to US$850 billion even as project numbers fell by 15% [1, p. 19]. The largest single project announced in a developed economy was a US$100 billion semiconductor investment in the United States by Taiwan Semiconductor Manufacturing [1, p. 20].

Other indicators were weaker. UNCTAD records a 7% fall in cross-border mergers and acquisitions (M&A), and international project finance values about 25% below their 2021 peak despite a 3% rise [1, p. 9]. The OECD, using different deal data, finds M&A values up 8% but announced greenfield capital spending down 3%, with spending in emerging and developing economies down 24% and their manufacturing projects down 44% [3].

Who invests, and on what terms. State-owned firms make up more than a quarter of UNCTAD's 2026 ranking of the top 100 multinational enterprises, and private equity firms now account for about 20% of global M&A [1, p. 3]. Governments are also more active. The 229 measures adopted in 2025 compare with 192 in 2024; 73% were favourable to investors, and incentives made up half of those [1, pp. 71, 73]. On the restrictive side, screening for national security accounted for almost 40% of all restrictive measures, all of them introduced by developed countries [1, p. 83].

3. Analysis

The following assessments are Meridian analysis based on the evidence above.

First, investment is following industrial policy. In developed economies, growth was concentrated in semiconductors, data centres, clean energy, batteries and advanced manufacturing, which UNCTAD identifies as the industries primarily targeted by industrial policies [1, p. 19]. It also notes that the leading hosts for project investment are large economies and those pursuing active industrial policies [1, p. 9]. Capital is responding to subsidy and security priorities as much as to market signals.

Second, the AI build-out may be crowding out other infrastructure. UNCTAD itself raises the concern that financing capacity concentrated in commercially attractive digital assets may be displacing other infrastructure investment, especially in project finance markets [1, p. 40]. Falls in renewable energy and basic infrastructure in the same year suggest that the energy transition and the development agenda are competing for the same capital with the data-centre boom.

Third, developing economies face a double squeeze. Their share of growth was small, lower-middle-income economies saw inflows fall, and the OECD records a sharp drop in manufacturing greenfield spending in emerging and developing economies [1, p. 8; 3]. Developed economies, meanwhile, are using public incentives to attract large semiconductor projects [1, p. 20]. This coincides with the fall in aid examined in MER/26/D03, narrowing the external finance available to the poorest countries.

Fourth, openness is becoming conditional. The spread of screening, from 21 economies in 2016 to 52 [1, p. 83], means that the origin of capital increasingly matters as much as its volume. For states and firms alike, investment decisions are now also security decisions.

4. Assessment

• The 2025 recovery in FDI is real but narrow: concentrated by country, by sector and by project size [1; 2; 3].
• Data centres and semiconductors drove growth, while renewables, infrastructure and trade-exposed manufacturing weakened [1].
• Differences between UNCTAD and OECD figures, including on China, are large enough that conclusions should rest on more than one series [1; 3].
• Indicators to watch: UNCTAD's next Global Investment Trends Monitor, the OECD's next FDI in Figures, and whether the share of restrictive investment measures keeps rising.

References

1. UNCTAD, World Investment Report 2026: International Investment in a Turbulent Era (United Nations, 2026), chapters I and II. https://unctad.org/system/files/official-document/wir2026_en.pdf (accessed 27 October 2026).
2. UNCTAD, "Global investment rises 6% to $1.6 trillion, but development gains remain uneven", news release, 7 July 2026. https://unctad.org/news/global-investment-rises-6-16-trillion-development-gains-remain-uneven (accessed 27 October 2026).
3. OECD, FDI in Figures, April 2026 (OECD, 2026). https://www.oecd.org/content/dam/oecd/en/publications/reports/2026/04/fdi-in-figures-april-2026_3eb27477/b3e12b44-en.pdf (accessed 27 October 2026).