FDI net inflows slump by 40.5% in August

By Katherine K. Chan

NET INFLOWS of foreign direct investments (FDI) into the Philippines slumped by 40.5% in August, amid a drop in net investments in debt instruments, the Bangko Sentral ng Pilipinas (BSP) reported on Monday.

Preliminary central bank data showed that net inflows declined by 40.5% year on year to $494 million from $830 million in the same month in 2024.

This was the lowest amount in two months or since the $376 million recorded in June.

Month on month, FDIs plunged by 61% from $1.268 billion in July.

“Net foreign direct investments into the Philippines remained positive in August 2025, with inflows from Japan and into manufacturing taking the lead,” the BSP said in a statement on Monday.

Net investments in debt instruments slumped by 73.8% to $145 million in August from $553 million a year ago.

These consisted mainly of intercompany borrowing or lending between foreign direct investors and their subsidiaries or affiliates in the Philippines, according to the central bank.

Meanwhile, investments in equity and investment fund shares rose by 26.1% to $349 million in August from $276 million in the same month last year.

Nonresidents’ net investments in equity capital, excluding reinvestment of earnings, more than doubled to $146 million from $66 million last year.

Equity placements grew by 53.2% to $158 million from $103 million a year ago, while withdrawals declined by 66.2% to $13 million from $37 million a year earlier.

Reinvestment of earnings also slipped by 3.6% to $203 million in August from $210 million a year ago.

Union Bank of the Philippines (UnionBank) Chief Economist Ruben Carlo O. Asuncion said in a Viber message the lower FDI inflows reflect the impact of external headwinds and domestic investor sentiment.

“The sharp decline in nonresidents’ net investments in debt instruments… was the main drag, suggesting reduced intercompany lending and financing activity amid cautious global conditions,” he added.

Mr. Asuncion said the main factors that contributed to the August slowdown include softening global trade, high US tariffs, geopolitical uncertainty, and tighter global financial conditions.

Meanwhile, Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort said the US tariffs and other protectionist policies as well as the flood control controversy may have weighed on investor sentiment.

“The series of typhoons from July (to) August could have also weighed on many local economic data, including FDIs, in view of reduced business days caused by these weather-related disruptions on the local economy,” he added in a Viber message.

EIGHT-MONTH FDI DOWN
In the first eight months of the year, FDI net inflows declined by 22.5% to $5.179 billion from $6.686 billion in the same period in 2024.

This came as investments in equity and investment fund shares fell by 18.7% to $1.786 billion from $2.195 billion a year earlier.

Net foreign investments in equity capital other than the reinvestment of earnings likewise dropped by 35.5% to $870 million from $1.349 billion a year ago.

Placements went down 20.1% to $1.364 billion, while withdrawals climbed by 37.6% to $494 million.

Nonresidents’ net investments in debt instruments declined by 24.4% to $3.393 billion in the eight-month period from $4.49 billion the previous year.

“For the first eight months of 2025, equity capital placements were sourced primarily from Japan, the United States, Singapore, and South Korea,” the central bank said.

Most foreign investments went into manufacturing, wholesale and retail trade, and real estate, it added.

“Domestically, while equity placements from Japan, the US, Singapore, and South Korea remained positive — particularly in manufacturing, retail, and real estate — the overall investment climate still faces challenges related to policy clarity, logistical bottlenecks, and execution gaps,” Mr. Asuncion said.

He said FDI net inflows are likely to pick up in the last quarter of the year.

“While this is below trend, we believe the BSP’s $7.5-billion full-year target remains achievable, albeit with downside risks,” he said. “The recent uptick in equity placements and reinvested earnings in July and August is encouraging, and we expect some recovery in (the fourth quarter) as sentiment stabilizes and seasonal investment flows pick up.”

Mr. Ricafort also noted that further easing by the central bank could help attract more FDIs into the country.

“Further rate cuts by the Fed and the BSP in the coming months would also make borrowing costs cheaper from the point of view of foreign investors, would helping increase demand for loans to finance more FDIs into the country, both new and expansion projects,” he said.

Since it began its easing cycle in August last year, the central bank has reduced its benchmark policy rate by 175 basis points to a three-year low of 4.75%.

BSP Governor Eli M. Remolona, Jr. earlier said they could deliver another cut later this year and into 2026. The Monetary Board’s last rate-setting meeting this year is on Dec. 11.