Foreign direct investments (FDIs) in the Philippines fell short of the $9 billion target as net inflows remained largely unchanged in 2024, with December net inflows dropping to its lowest level in 11 years, according to the central bank.
Bangko Sentral ng Pilipinas (BSP) data showed that net FDIs stood at $8.93 billion in 2024, nearly the same figure as the $8.925 billion recorded in 2023. The central bank’s forecast for this year is $10 billion.
Net FDIs represent the total foreign investments that flowed into the Philippines, minus those that exited.
Notably, net inflows in December 2024 dropped over 85 percent at $110 million. It stood at $743 million a year ago.
Records showed that December 2024 had the lowest monthly FDI inflow in 11 years, falling to its weakest level since December 2013, when it reached $102.1 million.
According to the BSP, brick-and-mortar FDI declined in December because local companies or businesses repaid more of their debts to foreign investors.
According to Michael Ricafort, chief economist at Rizal Commercial Banking Corp. (RCBC), this could be linked to global investor concerns over potential US President Donald Trump’s protectionist policies and rising China-Philippines tensions.
Some factors, he said, could be the delayed release of the CREATE MORE Law's implementing rules and regulations (IRR) and the severe typhoons and floods that disrupted economic activities, impacting foreign investments in some areas.
“Some foreign investors could have also waited for Fed [US Federal Reserve] and BSP rates to go down further before becoming more aggressive to finance more FDIs, amid still relatively higher global interest rates since 2022,” Ricafort said.
He noted that the most recent release of the CREATE MORE IRR may encourage foreign investors to commit to projects in the Philippines, benefiting from improved incentives.
Expected rate cuts by the Fed and the BSP could lower borrowing costs, making financing more attractive for foreign investors. This may boost demand for credit, supporting both new FDIs and expansion projects in the country.
The BSP previously paused on cutting key interest rates following its three consecutive quarter-point cuts last year.
Despite the foreseen rebound, Ricafort said FDI risks include Trump’s threats of higher US import tariffs and protectionist policies, which may push investors to relocate to the US instead.
Likewise, ongoing China-Philippines tensions in disputed waters could further weigh on investments in the coming months.
December FDIs
Due to higher debt repayments, net foreign investments in debt instruments recorded a $19 million outflow in December 2024. This reversed the $618 million inflow in December 2023.
Similarly, reinvested earnings dropped by nearly 15 percent to $80 million from $94 million.
In contrast, foreign net equity capital investments, excluding reinvested earnings, surged nearly 60 percent to $49 million in December 2024 from $31 million a year earlier.
Most equity capital came from Singapore, Japan, the US, and South Korea.
“These investments were mostly directed towards the information and communication; manufacturing; financial and insurance; construction; and real estate industries,” the BSP said.