Net inflows of brick-and-mortar foreign direct investments (FDI) into the Philippines increased to $586 million in May, fueled by stronger investor confidence driven by solid macroeconomic fundamentals, cooling inflation, and ongoing infrastructure growth.

Net FDI inflows climbed by 21.3 percent from $483 million in May last year, according to the preliminary data from the Bangko Sentral ng Pilipinas (BSP). Month-on-month, this was lower than the three-month high of April’s $610 million.

According to the BSP, this increase was driven by the massive growth in nonresidents’ net investments in debt instruments. It jumped by 88.3 percent year-on-year to $427 million from $227 million.

Meanwhile, reinvestment of earnings remained relatively stable at $97 million.

However, the BSP said this was partly offset by a 61.4-percent drop in nonresidents’ net investments in equity capital, excluding reinvested earnings, which fell from $161 million to $62 million.

The United States (US) emerged as the top source of equity capital placements in May, accounting for 36 percent of the total. It was closely followed by Japan with 33 percent, and Singapore and South Korea with 12 percent each.

Manufacturing accounted for the largest share of investments in May at 49 percent—nearly half of the total. It was followed by real estate at 14 percent, and electricity, gas, steam, and air conditioning supply industries at 13 percent. The remaining 24 percent went to other industries.

Despite the positive trend in May FDI, net inflows for the first five months declined by 26.9 percent to $3 billion from the $4 billion recorded in the same period a year ago. This continued the decline in the first five months.

Measured against the Philippines’ FDI target of $10 billion this year, the five-month total now stands at 30 percent. This year’s target is higher than last year’s $8.93 billion in attracted investments.

FDI refers to cross-border investments where a nonresident investor owns at least 10 percent equity in a local enterprise, and may take the form of equity capital, reinvested earnings, or intercompany borrowings.

John Paolo Rivera, senior research fellow at state-run policy think tank Philippine Institute for Development Studies (PIDS), said May’s FDI growth shows “improved investor sentiment” driven by strong macroeconomic fundamentals, easing inflation, and sustained infrastructure development.

“Externally, moderating global interest rates and a recovery in regional trade also helped,” Rivera said.

“However, the year-to-date decline shows that inflows remain sensitive to policy clarity, geopolitical risks, and tariff developments,” Rivera further said, adding that maintaining growth near the 5.4-percent first-half average could sustain a modest FDI recovery in the second half of the year.

“To gain stronger traction, the Philippines needs to accelerate reforms in ease of doing business (EODB), investment facilitation, and trade diversification to counter headwinds from global uncertainty.”