The Philippines posted a sharp drop in foreign direct investment (FDI) as increasingly cautious foreign firms dramatically reduced lending to their local units amid global interest rate and slow-growth pressures.


Net inflows of brick-and-mortar FDI into the Philippines fell to $494 million in August from $830 million in the same month last year, according to preliminary data from the Bangko Sentral ng Pilipinas (BSP).

The 40.5-percent decline was driven by a massive 73.8-percent drop in net debt instruments, falling to $145 million from $553 million in the same month in 2024.

However, the BSP said in a statement on Monday, Nov. 10, that net FDI into the country “remained positive in August, with inflows from Japan and into manufacturing taking the lead.”

For the first eight months of the year, net FDI inflows dropped 22.5 percent to $5.2 billion from the $6.7 billion posted in the same period in 2024, continuing the decline from end-July.

Japan emerged as the primary source of equity capital placements as of end-August, followed by the United States (US), Singapore, and South Korea.

“Industries that received most of these investments were manufacturing, wholesale and retail trade, and real estate,” the BSP reported.

Measured against the Philippines’ FDI target of $10 billion for this year, the eight-month total now stands at 52 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 equity in a local enterprise and may take the form of equity capital, reinvested earnings, or intercompany borrowings.

“A sharp decline suggests foreign firms are becoming more cautious about lending additional funds to their local units, possibly due to slower project rollout, weaker growth prospects, or high global interest rates,” said John Paolo Rivera, senior research fellow at state policy think tank Philippine Institute for Development Studies (PIDS).

On the external front, Rivera said investors “have turned cautious due to high interest rates, slower world trade, and geopolitical uncertainty, which makes them hold back on new projects in emerging markets (EMs).”

“Domestically, the Philippines is facing policy uncertainty and slower government spending, which may have weakened investor confidence in short-term prospects,” Rivera further said.

He argued, however, that net inflows reflect investors’ upbeat outlook for the country’s long-term potential, particularly in “manufacturing, renewable energy (RE), and infrastructure.”

Rivera expects FDI to remain “modest but positive” for the rest of the year, with a slight improvement in early 2026 as spending picks up and reforms and project pipelines become clearer.

Rivera said the government could restore investor confidence by signaling policy stability and fast-tracking investment-ready projects.