Net inflows of brick-and-mortar foreign direct investments (FDI) in the Philippines rebounded in July to a one-year high of $1.27 billion, recovering from a six-month low in June.

Despite this record, net FDI inflows declined by 7.5 percent from $1.37 billion in July last year, according to preliminary data from the Bangko Sentral ng Pilipinas (BSP).

However, the BSP argued in a statement released on Friday, Oct. 10, that net FDI into the country “remained positive in July, with inflows from Japan and into wholesale and retail trade taking the lead.”

According to the BSP, the decline in net FDI inflows in July resulted from lower nonresidents’ net investments in debt instruments, which fell by 39.4 percent to $711 million from $1.2 billion a year ago.

However, the BSP said this reduction was partly offset by the 450.6 percent increase in nonresidents’ net investments in equity capital, rising from $76 million to $418 million. Additionally, reinvestment of earnings grew by 14.3 percent, from $122 million to $139 million.

Japan emerged as the top source of equity capital placements during the month, accounting for 89 percent of the total, with the United States accounting for eight percent.

Wholesale and retail trade accounted for the largest share of investments in July at 73 percent—nearly three-fourths of the total. It was followed by manufacturing (12 percent) and real estate activities (eight percent). Other industries accounted for the remaining six percent.

For the first seven months of the year, net FDI inflows dropped by 20 percent to $4.69 billion from the $5.86 billion posted in the same period in 2024. This continued the decline in the first semester.

Measured against the Philippines’ FDI target of $10 billion this year, the seven-month total now stands at 46.9 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 of the equity in a local enterprise and may take the form of equity capital, reinvested earnings, or intercompany borrowings. 

Angelo Taningco, chief economist at Security Bank, explained that the annual FDI drop in July “was due to a high base, as July last year posted relatively large FDI inflows.”

Looking ahead, Taningo anticipates FDI inflows “to be tempered by increased external uncertainty from higher US tariffs as well as domestic governance issues surrounding government flood control projects.”

“Moderation in both investor sentiment and business confidence will likely ease FDI inflows over the near term,” he further said.

Rizal Commercial Banking Corp. Chief Economist Michael Ricafort said the monthly FDI number remains decent, as it exceeded $1 billion. It also emerged as “among the highest since the pandemic started in 2020.”

Ricafort argued this level remains “an encouraging signal and still a bright spot for the economy in terms of creating more jobs and other business and economic opportunities in the local economy.”