MANILA, Philippines — Net foreign direct investment (FDI) inflows into the Philippines fell nearly 18% in the first half of the year as market volatility and concerns over the country’s economic growth weighed on investor activity.
Bangko Sentral ng Pilipinas data showed FDI inflows exceeded outflows by $3.4 billion from January to June, down from the same period last year.
The first-half figure represented nearly 49% of the BSP’s revised full-year target of $7 billion in net FDI inflows. Net inflow in June alone reached $447 million, the lowest in two months.
FDI generally provides more stable capital than foreign portfolio investments, which investors can quickly withdraw during periods of market uncertainty. Foreign companies that establish or expand operations can also create jobs and support industrial development.
Intercompany borrowings accounted for much of the decline. Loans between multinational companies and their Philippine subsidiaries fell nearly 26% to $2.1 billion during the first half.
Reinvestment of earnings also declined 19% to $829 million, indicating that foreign companies returned more profits to their parent firms or retained less earnings for expansion in the Philippines.
Equity investments, however, increased during the period. Foreign equity capital placements reached $725 million, while withdrawals totaled $236 million, resulting in a net equity inflow of $489 million. That figure increased 59.4% from a year earlier.
Leonardo Lanzona, an economist at Ateneo de Manila University, said global financial market volatility, partly linked to the conflict in the Middle East, and the lingering effects of a recent graft scandal continued to affect investor sentiment toward the Philippines.
“Elevated US rates and peso depreciation likely reduced the incentive to route working capital through Philippine affiliates as debt, while falling reinvested earnings point to either compressed affiliate profitability or a shift toward repatriating profits rather than reinvesting,” Lanzona said.
Lanzona said the outlook for the rest of the year remained uncertain, citing a widening gap between investment pledges and actual capital inflows.
“Absent a clearer BSP easing path, faster post-scandal infrastructure disbursement and resolution on tariff uncertainty, net FDI likely stays subdued, with equity capital the metric to watch for a genuine inflection,” he said.
