Foreign direct investment (FDI) in the Philippines declined to its lowest level in four months during January, signaling a cautious start to the year as geopolitical tensions and economic uncertainties dampen investor confidence.
According to the Bangko Sentral ng Pilipinas (BSP), net FDI inflows reached $443 million in January, marking the smallest monthly gain since September 2025. This slowdown reflects broader global challenges, including an ongoing oil-price shock and escalating geopolitical risks that have made investors more hesitant.
Robert Dan Roces, group economist at SM Investments, noted, "FDI slowed mainly on timing—fewer big reinvestments and softer intercompany flows—plus cautious sentiment from high global rates and geopolitical noise."
Breaking down the data, equity capital—which represents new foreign investments—fell nearly 9% year-on-year to $93 million, while outflows increased by 57% to $22 million. This resulted in a net equity inflow of $70 million, a 20% drop from previous levels. The majority of these equity placements originated from Japan, the United States, and South Korea, primarily targeting the manufacturing, real estate, and wholesale and retail trade sectors.
Intercompany borrowings, which constitute the largest portion of FDI, decreased by 38% to $320 million, while reinvestment of earnings plummeted 57% to $53 million. Ruben Carlo Asuncion, chief economist at UnionBank of the Philippines, explained, "The weaker FDI inflow in January likely reflects continued investor caution amid elevated geopolitical risks, tight global financial conditions, and uncertainty over the global growth outlook."
Unlike more volatile portfolio investments, FDI typically involves long-term commitments that support job creation and industrial development. The Philippine government has been actively working to attract and retain such investments despite the challenging environment.
Looking forward, the BSP projects FDI to reach $7.5 billion by the end of the year, down from the $7.8 billion recorded in 2025, as ongoing conflicts in the Middle East and other global uncertainties continue to influence investor decisions.