WASHINGTON — Foreign direct investment (FDI) flows into developing economies dropped to $435 billion in 2023, the lowest since 2005, with just $336 billion flowing into advanced economies, the lowest since 1996, the World Bank reported on Monday.

It said growing investment and trade barriers, fragmentation and macroeconomic and geopolitical risks were depressing the outlook for FDI flows into developing countries, posing a threat to development efforts.

“The sharp drop in FDI to developing economies should sound alarm bells,” Ayhan Kose, the World Bank’s deputy chief economist, said in a statement released with the report. “Reversing this slowdown is not just an economic imperative — it’s essential for job creation, sustained growth, and achieving broader development goals.”

The report noted that global and national recessions were associated with a significant deterioration in FDI, with FDI starting to weaken before a recession hit. It said the decline in foreign investment had left “vast infrastructure gaps unmet” in developing countries, while eroding efforts to end global poverty and address urgent climate change needs.

Mr. Kose said bold domestic reforms were needed to improve the business climate and expand global cooperation, which could spur increased rates of cross-border investment.

The report, based on data from 2023, the latest available, said developing economies should ease restrictions that have built up in recent years, promote trade integration and encourage more people to participate in the formal economy.

It urged countries to work together to ensure FDI flows went to developing economies with the largest investment needs.

The bank released the report a week after downgrading its 2025 global economic forecast by four-tenths of a percentage point to 2.3%, warning that higher tariffs and heightened uncertainty posed a “significant headwind” for nearly all economies.

World Bank Chief Economist Indermit Gill said in the statement the dwindling FDI, a key driver of economic growth, is the direct result of public policy that had seen a proliferation of trade and investment restrictions.

“In recent years, governments have been busy erecting barriers to investment and trade when they should be deliberately taking them down. They will have to ditch that bad habit,” he said.

FDI has averaged almost $2 trillion per year globally during the past decade, the bank said, adding that data suggested that a 10% increase in FDI inflows could boost GDP in an average developing economy by 0.3% after three years. The impact could be much larger — 0.8% — in countries with stronger institutions, lower informality and greater trade openness.

As a share of their gross domestic product, FDI inflows to developing economies in 2023 were just 2.3%, about half the number during the peak year of 2008.

FDI flows to emerging markets and developing economies grew rapidly during the 2000s, peaking at nearly 5% of gross domestic product in the typical economy in 2008, but they have declined since then, the report said.

Trade growth also weakened significantly from 2020 to 2024, dropping to its slowest pace since 2000, while economic uncertainty spiked to the highest since the turn of the century, the bank said.

The three largest developing countries — China, India and Brazil — jointly received almost half of total FDI inflows during the 2012-2024 time period. Advanced economies accounted for nearly 90% of total FDI in developing economies over the past decade, with about half of that coming from the European Union and the United States, the bank said. — Reuters

JERUSALEM/WASHINGTON/DUBAI — Iran and Israel launched new missile strikes at each other on Wednesday as the air war between the two longtime enemies entered a sixth day despite a call from US President Donald J. Trump for Tehran’s unconditional surrender.

The Israeli military said two barrages of Iranian missiles were launched toward Israel in the first two hours of Wednesday morning. Explosions were heard over Tel Aviv.

Israel told residents in a southwestern area of Tehran to evacuate so its air force could strike Iranian military installations. Iranian news websites said Israel was attacking a university linked to Iran’s Revolutionary Guards in the east of the capital.

Iranian news websites said Israel was also attacking a university linked to Iran’s Revolutionary Guards in the country’s east, and the Khojir ballistic missile facility near Tehran, which was also targeted by Israeli airstrikes last October.

The US Office of the Director of National Intelligence says Iran is armed with the largest number of ballistic missiles in the Middle East. Iran has said its ballistic missiles are an important deterrent and retaliatory force against the US, Israel and other potential regional targets.

Mr. Trump warned on social media on Tuesday that US patience was wearing thin. While he said there was no intention to kill Iran’s leader Ayatollah Ali Khamenei “for now,” his comments suggested a more aggressive stance toward Iran as he weighs whether to deepen US involvement.

“We know exactly where the so-called ‘Supreme Leader’ is hiding,” he wrote on Truth Social. “We are not going to take him out (kill!), at least not for now… Our patience is wearing thin.”

Three minutes later Mr. Trump posted, “UNCONDITIONAL SURRENDER!”

Mr. Trump’s sometimes contradictory and cryptic messaging about the conflict between close US ally Israel and longtime foe Iran has deepened the uncertainty surrounding the crisis. His public comments have ranged from military threats to diplomatic overtures, not uncommon for a president known for an often erratic approach to foreign policy.

A source familiar with internal discussions said Mr. Trump and his team are considering a number of options, including joining Israel on strikes against Iranian nuclear sites.

A White House official said Mr. Trump spoke to Israeli Prime Minister Benjamin Netanyahu by phone on Tuesday.

Mr. Trump also met for 90 minutes with his National Security Council on Tuesday afternoon to discuss the conflict, a White House official said. Details were not immediately available.

The US is deploying more fighter aircraft to the Middle East and extending the deployment of other warplanes, three US officials told Reuters. The US has so far only taken indirect actions in the current conflict with Iran, including helping to shoot down missiles fired toward Israel.

A source with access to US intelligence reports said Iran has moved some ballistic missile launchers, but it is difficult to determine if they were targeting US forces or Israel.

However, Britain’s leader Keir Starmer, speaking at the Group of Seven nations summit in Canada that Mr. Trump left early, said there was no indication the US was about to enter the conflict.

REGIONAL INFLUENCE WEAKENS
Mr. Khamenei’s main military and security advisers have been killed by Israeli strikes, hollowing out his inner circle and raising the risk of strategic errors, according to five people familiar with his decision-making process.

With Iranian leaders suffering their most dangerous security breach since the 1979 Islamic Revolution, the country’s cybersecurity command banned officials from using communications devices and mobile phones, Fars news agency reported.

Israel launched a “massive cyber war” against Iran’s digital infrastructure, Iranian media reported.

Ever since Iran-backed Hamas attacked Israel on Oct. 7, 2023, and triggered the Gaza war, Khamenei’s regional influence has waned as Israel has pounded Iran’s proxies — from Hamas in Gaza to Hezbollah in Lebanon, the Houthis in Yemen and militias in Iraq. Iran’s close ally, Syria’s autocratic president Bashar al-Assad, has been ousted.

Israel launched its air war, its largest ever on Iran, on Friday after saying it had concluded the Islamic Republic was on the verge of developing a nuclear weapon.

Iran denies seeking nuclear weapons and has pointed to its right to nuclear technology for peaceful purposes, including enrichment, as a party to the international Non-Proliferation Treaty (NPT).

Israel, which is not a party to the NPT, is the only country in the Middle East believed to have nuclear weapons. Israel does not deny or confirm that.

Mr. Netanyahu has stressed that he will not back down until Iran’s nuclear development is disabled, while Mr. Trump says the Israeli assault could end if Iran agrees to strict curbs on enrichment.

Before Israel’s attack began, the 35-nation board of governors of the UN nuclear watchdog, the International Atomic Energy Agency (IAEA), declared Iran in breach of its non-proliferation obligations for the first time in almost 20 years.

The IAEA said on Tuesday an Israeli strike directly hit the underground enrichment halls at the Natanz facility.

Israel says it now has control of Iranian airspace and intends to escalate the campaign in coming days.

But Israel will struggle to deal a knock-out blow to deeply buried nuclear sites like Fordow, which is dug beneath a mountain, without the US joining the attack.

Iranian officials have reported 224 deaths, mostly civilians, while Israel said 24 civilians had been killed. Residents of both countries have been evacuated or fled.

Global oil markets are on high alert following strikes on sites including the world’s biggest gas field, South Pars, shared by Iran and Qatar. — Reuters

NEW YORK/LONDON — Airfares from Europe to the United States have dropped to rates not seen since before the pandemic, as travelers from Western Europe lead a pullback in travel to the US that is expected to continue through at least July.

Overseas arrivals to the United States fell 2.8% in May from a year ago, according to preliminary data from the US National Travel and Tourism Office (NTTO) within the US Department of Commerce. Travel from Western Europe fell 4.4% in May although travel from Eastern Europe rose 4.6% in the same period.

Forward bookings suggest sustained declines are on the horizon, with total inbound bookings to the US in July down 13% year over year, according to OAG Aviation, an analytics firm.

Transatlantic airfare has been declining since the first quarter when Europeans started reconsidering travel to the US after President Donald J. Trump suggested annexing Greenland, launched a global trade war, and issued orders that focus on stricter border policy. A stronger dollar has also deterred some trips.

In March, travel from Western Europe fell 17% year over year, according to the NTTO.

Average round-trip economy airfares for over 50 routes from the US to Europe in the first quarter were down an average of 7% year over year, with rates to fly between Atlanta, Georgia, and London, down 55%, according to data from Cirium, an aviation analytics firm.

As American consumers have been bargain-hunting and waiting closer to their departure dates to finalize travel plans, the decline in demand from Europe is another factor contributing to cheaper travel.

“Fewer seats filled by European travelers to the US, and a slower pace of growth in US outbound to Europe than last year, will tend to cast 2025 as a tougher year to make money on transatlantic routes,” said Aran Ryan, director of industry studies at Tourism Economics, a subsidiary of Oxford Economics.

This summer, the price of round-trip tickets from the US to Europe is down 10% compared with a year ago, travel booking app Hopper said. Average fares of $817 per ticket are in line with prices to Europe in the summer of 2019 before the pandemic.

Major carriers, including Air France KLM and Germany-based Lufthansa, expect slowing activity. Lufthansa Chief Executive Officer (CEO) Carsten Spohr said the company expects weaker demand in the third quarter, while Air France KLM CEO Ben Smith said the company is seeing a “slight pullback” in transatlantic traffic and will slash prices to keep cabins on its transatlantic flights full.

Airlines including Lufthansa and US air carrier United Airlines say higher demand from U.S. travelers flying to Europe is offsetting the decline of Europeans flying the opposite direction. United said international bookings from Europe fell 6% in the first quarter, but added that US-originating demand made up for the pullback. Rival Delta Air Lines said 80% of its long-haul international demand originates from the US, and fares in the region are “significantly higher” than in the rest of the world.

Lufthansa said it plans to market its transatlantic flights to more Americans given the higher demand, despite travel from Western Europe showing moments of recovery. Travel from the region to the US increased 12.1% in April before falling again in May, according to data from the NTTO.

As of mid-May, there are 4.3% more international flights scheduled to depart from US airports for international destinations this summer, said Hopper.

“We feel really good about the transatlantic market,” American Airlines CFO Devon May said at a Wolfe Research transportation and industrials conference in May. — Reuters