Net foreign direct investment (FDI) inflows into the Philippines reached a near 10-year low in April, according to data from the Bangko Sentral ng Pilipinas (BSP). The country recorded $250 million in net FDI during the month, a 58.8% drop from $607 million in April 2023. This marks the lowest monthly level since June 2016 and the sharpest annual decline since December 2022, when FDI fell 76.1%. The decline in April followed a 59.1% month-on-month contraction from the $611 million recorded in March, reflecting a broader trend of sustained weakness. Earlier in December 2024, FDI inflows had already plummeted by 85.2% to $110 million compared to $743 million in the same month the previous year, highlighting a steep year-over-year decline that preceded the April slump.
Investor caution and shifting flows
April’s FDI slump was driven by a 91.7% plunge in net investments in debt instruments, which fell to $44 million from $522 million a year earlier. Reinvestment of earnings also declined slightly, dropping 1.9% to $80 million. However, equity and investment fund shares saw a surge, more than doubling to $207 million. Foreign net investments in equity capital other than reinvestment of earnings jumped 3,041% annually to $127 million. These figures contrast with the 18.3% increase in investments in equity and investment fund shares during the four months ending in April, which rose to $750 million from $634 million in the same period last year. Meanwhile, withdrawals from equity investments collapsed by 70.5% to $61 million in April from $207 million a year ago, indicating a sharp reduction in disinvestments.
Ruben Carlo O. Asuncion, chief economist at Union Bank of the Philippines, noted the sharp decline likely reflects weaker intercompany borrowings, slower reinvestment activity, and investor caution amid global uncertainty. He pointed to trade tensions, geopolitical risks, and financial market volatility as factors deterring multinational firms from expanding or deploying capital. Asuncion also highlighted that reinvestment of earnings fell by 14% annually to $285 million in April, a steeper decline than the 1.9% drop previously reported, showing broader challenges in sustaining reinvestment flows. The slowdown in reinvestment of earnings was accompanied by a 21.4% rise in equity placements to $136 million, suggesting a shift in focus toward direct equity investments rather than retained earnings.
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Domestic growth and uneven recovery
Domestic economic growth in the first quarter of 2025 also tempered investment decisions, Asuncion noted. For the four months ending in April, cumulative FDI inflows totaled $1.968 billion, down 26.5% from $2.675 billion in the same period last year. This marks the 15th consecutive month of year-on-year declines. Nonresident net investments in debt instruments fell 40.3% to $1.218 billion in the January-to-April period, reflecting a persistent shift away from debt-linked investments. Meanwhile, equity capital investments excluding reinvestment of earnings rose 53.7% to $464 million, with the bulk of flows coming from Japan, the U.S., and Singapore. These investments were directed into manufacturing, financial services, and real estate, sectors that have historically attracted foreign capital due to their growth potential and stability.
Despite the downturn, Asuncion said FDI is unlikely to collapse permanently. He cited long-term investment fundamentals, infrastructure improvements, and sectoral growth opportunities as potential drivers for recovery. As global financial conditions stabilize and domestic growth gains traction, FDI inflows will gradually recover, though the pace will remain uneven, he said. The BSP expects total FDI net inflows for 2025 to reach $7 billion, down from an estimated $7.8 billion in 2024. FDI data reflect actual investment flows, distinct from the Philippine Statistics Authority’s approved foreign investment figures, which track commitments that may not materialize immediately.
