Foreign direct investment (FDI) inflows into the Philippines lost steam in August, dropping by 40.5 percent year-on-year to $494 million as investors tempered capital expansion amid lingering global uncertainties.
Data from the Bangko Sentral ng Pilipinas (BSP) showed that the figure marked a sharp decline from July’s one-year high of $1.27 billion. It marked the weakest inflow in two months or since June’s $376 million.
The decline was mainly attributed to the drop in investments in debt instruments, which plunged by 73.8 percent to $145 million from $553 million in August last year.
Reinvested earnings were slightly lower at $203 million, down 3.6 percent from $210 million in the same period.
In contrast, fresh equity capital placements showed a measure of resilience, rising by 53.2 percent to $158 million from $103 million in 2024.
However, withdrawals fell sharply to $13 million from $37 million. This brought total equity other than reinvested earnings to $146 million, more than double the previous year’s $66 million.
The BSP said most of these placements came from Japan and were largely directed toward the manufacturing sector.
From January to August, total net FDI inflows reached $5.18 billion, down 40.5 percent from $6.69 billion in the same period last year.
Equity other than reinvested earnings fell by 35.5 percent to $870 million, while placements declined by 20.1 percent to $1.36 billion and withdrawals jumped by 37.6 percent to $494 million.
“For the first eight months of 2025, equity capital placements were sourced primarily from Japan, the United States, Singapore and South Korea,” the BSP said. “Industries that received most of these investments were manufacturing, wholesale and retail trade, and real estate.”
Despite the downturn, analysts said investor confidence in the Philippines remains intact, anchored by strong macroeconomic fundamentals and reform momentum.
“FDI performance reflects continued optimism about the Philippines’ long-term growth prospects and macroeconomic stability,” said Jean de Castro, head of fixed income for Manulife Investment Management.
De Castro cited the country’s stable gross domestic product growth, favorable demographics, and improving credit ratings as key factors supporting investor sentiment.
She added that continued infrastructure development and the Philippines’ participation in regional trade frameworks such as the Regional Comprehensive Economic Partnership (RCEP) also help sustain its appeal as an investment hub.
According to De Castro, consistent inflows of FDI—alongside remittances, BPO revenues, and solid gross international reserves—are providing crucial support for the local bond market.
“These inflows ensure a steady supply of foreign currency, further supporting local liquidity and government securities,” De Castro said. “Even amid global volatility and rising US Treasury yields, Philippine bonds have shown stable yields and resilient demand.”
She also said the overall environment provides a solid foundation for fixed income strategies as the year ends, making Philippine government bonds attractive to both domestic and offshore investors.
