Developing Economies Face Historic Investment Shortfall — World Bank Warns

By Nii Trebi Hammond

Developing countries, including Ghana, are facing an “investment shortfall of historic proportions” that threatens growth, job creation and the achievement of global development targets, according to a new World Bank report Accelerating Investment: Challenges and Policies 

The Bank warns that emerging market and developing economies (EMDEs) now require investment equivalent to 5 percent of global GDP every year to meet even the most modest development and climate goals, an amount that runs into trillions of dollars annually. For low-income countries (LICs), the financing gap is even more severe, estimated at 8 percent of GDP each year.

Yet this urgent need for capital is emerging at a time when investment flows are shrinking. The report notes that since the 2008–09 global financial crisis, total investment growth in developing economies has halved, falling from an average of 10 percent in the 2000s to just around 5 percent over the past decade. Both public and private investment have weakened sharply, with governments constrained by high debt levels and private investors deterred by policy uncertainty, weak institutions and global fragmentation.

“This tension between burgeoning needs and dwindling resources defines the challenge,” the report says, stressing that without a revival of investment, many developing countries risk extended stagnation and could “miss even the most basic development objectives,” including infrastructure improvements, poverty reduction and climate adaptation.

The consequences are most visible in sectors such as energy, water, transport and digital connectivity, where gaps remain wide. Globally, 740 million people still lack access to electricity, while one-quarter of the world’s population does not have access to safe drinking water. Many countries in Sub-Saharan Africa, including Ghana, continue to struggle with failing infrastructure, a digital divide and limited job creation, problems the Bank argues cannot be addressed without a substantial increase in capital investment.

The report highlights that the slowdown is not merely a temporary trend but a structural shift. Private investment, historically the engine of growth has been “severely weakened,” while foreign direct investment (FDI), a critical source of technology and expertise, has fallen to its lowest level in over a decade. Compounding the problem is the retreat of global economic integration, rising geopolitical tensions and shrinking aid flows.

Despite the bleak assessment, the World Bank insists that an investment revival is possible. It points to historical examples of “investment accelerations” that transformed developing economies through rapid and sustained capital growth. However, it stresses that such accelerations occur only when countries implement comprehensive reform packages, not isolated measures. These include restoring macroeconomic stability, strengthening institutions, deepening trade and financial integration and improving public investment efficiency.

For countries like Ghana, currently implementing IMF-backed reforms and facing tight fiscal conditions, the report offers both a warning and a roadmap: investment must rise, but it will require decisive policy action, stronger institutions and renewed global support.

The Bank concludes that “policy makers have the tools to spark new investment miracles.” Without them, the world’s poorest economies risk falling further behind in achieving growth, jobs and shared prosperity.